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Deutsche Bank Markets Research

Asia Malaysia Consumer

Industry

Asian Palm Oil Industry

Date 15 November 2013

Recommendation Change

More positive on CPO price; upgrade earnings and price targets Raising CPO price assumptions

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Deutsche Bank AG/Hong Kong

This research has been prepared in association with PT Deutsche Bank Verdhana Indonesia. The opinions contained in this report are those of PT Deutsche Bank Verdhana Indonesia.

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 054/04/2013.

Michelle Foong

Research Analyst (+60) 3 2053 6769 [email protected]

Jovin Ng

PT Deutsche Bank Verdhana IndonesiaResearch Analyst (+62) 21 2964 4518 [email protected]

Key Changes

Company Target Price Rating

SIME.KL 8.10 to 10.60(MYR)

Hold to Buy

FGVH.KL 3.10 to 4.80(MYR)

Sell to Buy

GAGR.SI 0.50 to 0.75(SGD) Sell to Buy

LSIP.JK 1,350.00 to 2,030.00(IDR)

Hold to Buy

AALI.JK 17,200.00 to 24,300.00(IDR)

Hold to Buy

WLIL.SI 3.70 to 4.40(SGD) Hold to Buy

KLKK.KL 17.10 to 27.00(MYR)

Sell to Buy

IOIB.KL 4.10 to 6.00(MYR)

Sell to Buy

Source: Deutsche Bank

Top picks

Golden Agri-Resources (GAGR.SI),SGD0.58

Buy

Kuala Lumpur Kepong (KLKK.KL),MYR23.12

Buy

Wilmar International (WLIL.SI),SGD3.55 Buy


Upside potential

Shr price Target price

Upside (%)

FGV 4.30 4.80 11.6%

IOI 5.41 6.00 10.9%

KLK 23.20 27.00 16.4%

SIME 9.49 10.60 11.6%

GGR 0.59 0.75 27.8%

WIL 3.55 4.40 23.9%

AALI 21,550 24,300 12.8%

LSIP 1,820 2,030 11.5%


This report changes ratings, target prices and/or estimates for several stocks under our coverage. For details see Figure 25.

We have turned positive on CPO price and expect production to surprise the market on the downside in 2014-15 while demand should remain robust. Further catalysts include new land regulations in Indonesia that should slow plantings longer term while mandated biodiesel blending is a potent driver for new CPO demand growth. Consequently, we have put ourselves at the top end of consensus, increasing our average CPO price forecasts by 8% in 2014E to RM2,800/MT and 2015E by 7% to RM2,900/MT. We have raised earnings and target prices for all plantation stocks under coverage and have upgraded them to Buy. Specifically, our top Buy picks are GGR, KLK and WIL.

A tightening supply picture meets… CPO inventories are likely to ease as a result of slower global production growth of 4.0% in 2014E and 3.8% in 2015E driven by 1) tree stress following high production cycles in 2011-13, 2) lingering impact of El Nino weather on the palm trees, 3) a slowdown in growth of mature hectarage, especially in Indonesia as companies pulled back expansion exercises during the global financial crisis as well as selective “restraint” in terms of planting to enable companies to be environmentally certified (i.e. not planting on peat land or cutting down rainforests).

… a robust demand backdrop We are bullish on palm oil demand in 2014E and 2015E, projecting 7.9% p.a. growth in consumption. The risks to estimates is biased to the upside, a view underpinned by 1) our upbeat economic outlook for 2014E and 2015E, 2) continued rapid growth in key developing nations, such as India and China, and 3) positive influence of biodiesel off take globally. Meanwhile, we note that domestic port inventories of palm oil in China have eased to a 20-month low. Re-stocking activities in China and India should be supportive of a stronger CPO price in the near-to-midterm. China and India together account for 26.4% of palm oil demand annually.

Raising target prices for all stocks under coverage; all Buy rated now We have raised earnings and target prices for all plantation stocks under coverage. We prefer stocks with the optimal combination of (1) the highest palm oil earnings component, 2) highest CPO price sensitivity and 3) liquidity. Our top picks for the sector are GGR and KLK. We also like WIL for its market leadership in China, exposure to growing food demand, buoyed by strong economic growth in emerging economies and not so much as a proxy to raising CPO prices per se. KLK is our preferred pick for Malaysian exposure given implied upside to our price target and the group’s strong plantation output growth profile and corporate governance culture. Our earnings estimates are on average 17-18% ahead of consensus FY14-15E, respectively, due to our more bullish CPO price forecasts. Risks to our outlook on CPO price and plantation equities are 1) a strong rise in soybean production in the US in 2H14, 2) global economic slowdown, 3) changes in government regulations on plantation land ownership, 4) a surge in plantation-related costs such as labor and fertilizer costs and 5) significant US dollar strength.

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Raising forecasts

Get set for an up-cycle

CPO price was a laggard for most of 2013E versus its competing edible oils such as soybean oil. However, with improving fundamentals going into 2014 – i.e. tightening supply outlook amid still robust consumption growth, continued rapid economic growth in key developing markets and increasingly positive influence of biodiesel off take, we are now bullish on the CPO price going into 1Q14. Consequently, we have raised our 2014-15 palm oil forecasts by 7.7% and 7.4% to RM2,800/MT and RM2,900/MT, respectively, and introduce our 2016 forecast of RM3,000/MT. This compares with the current CPO price of RM2,508/MT and YTD average of RM2,380/MT. Our 2014 CPO estimates are 4-12% above the markets’ expectation of RM2,500 – RM2,700/MT over the same period.

Figure 1: Deutsche Bank CPO price forecasts for 2013-16E (RM) 2012 2013E 2014E 2015E 2016E

New 2,900 2,300 2,800 2,900 3,000

Previous NA 2,300 2,600 2,700 na

Change (%) NA 0.0% 7.7% 7.4% na

% YoY chg -11.4% -20.7% 21.7% 3.6% 3.4%Source: Deutsche Bank estimates, Bloomberg Finance LP for 2012 data

Slower production growth + robust demand = upside risk to CPO price

Easing inventories and slower production growth ahead We expect CPO inventories to ease as a result of slower global production growth of 4.0% in 2014E and 3.8% in 2015E driven by 1) tree stress following high production cycles in 2012-13, 2) lingering impact of El Nino weather on the palm trees, 3) a slowdown in growth of mature hectarage, especially in Indonesia in 2009-2012 as companies pulled back expansion exercises during the global financial crisis, faced delays in land clearing due to social issues as well as adopted a selective “restraint” in terms of planting to to be environmentally certified (i.e. not planting on peat land or cutting down rainforests). We now expect palm oil stock/usage ratio to ease from 16.6% in 2013 to 15.7% and 11.1% in 2014 and 2015, respectively.

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Figure 2: Inventory levels in Malaysia

Figure 3: Lower stock-usage ratio in 2014-15E to be

supportive of CPO price

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Source: Deutsche Bank, MPOB, Bloomberg Finance LP Source: Deutsche Bank, Oil World, Bloomberg Finance LP

Figure 4: World demand and supply for Palm Oil Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E

Opening Stock 3.7 4.1 3.8 3.8 4.4 5.2 5.8 5.9 7.2 7.2 5.9 5.3 7.4 9.3 9.5

Malaysia 11.8 11.9 13.4 13.4 15.1 15.5 15.3 17.6 17.3 17.0 18.9 18.8 19.9 20.3 20.5

Indonesia 8.1 9.4 10.6 12.0 13.5 15.5 16.4 19.3 20.6 22.0 24.0 26.9 30.1 31.6 33.2

Others 3.9 3.8 3.8 4.5 5.1 5.1 6.0 5.8 6.5 6.6 6.9 8.0 8.2 8.6 9.1

Total Production 23.8 25.0 27.7 29.9 33.7 36.2 37.7 42.6 44.3 45.6 49.8 53.7 58.2 60.6 62.9

Net Export -0.1 0.2 -0.1 0.0 -0.2 0.0 0.3 0.2 -0.3 0.1 0.2 -0.4 0.6 0.2 0.2

EU 2.8 3.3 3.5 3.8 4.5 4.5 4.8 5.2 5.6 5.8 6.2 5.7 6.5 7.2 7.9

China 2.1 2.5 3.5 3.4 4.3 5.2 5.5 6.2 5.9 6.6 6.4 6.1 6.4 6.7 7.1

India 3.9 3.5 4.1 3.6 3.3 2.8 3.7 4.9 6.6 6.4 8.6 7.6 8.5 9.2 9.9

Others 14.7 15.9 16.8 18.4 20.9 22.9 23.4 25.0 26.6 28.0 29.0 32.7 34.4 37.1 40.1

Total Consumption 23.5 25.2 27.9 29.2 33.0 35.5 37.4 41.2 44.7 46.8 50.2 52.1 55.8 60.2 64.9

Ending Stock 4.2 3.8 3.8 4.4 5.2 5.8 5.9 7.2 7.2 5.9 5.3 7.4 9.3 9.5 7.2

Stock/usage 17.8% 15.3% 13.4% 14.9% 15.6% 16.4% 15.8% 17.5% 16.0% 12.6% 10.5% 14.1% 16.6% 15.7% 11.1%

Production growth n.a 5.2% 10.8% 7.6% 12.7% 7.4% 4.4% 13.0% 4.0% 2.9% 9.3% 7.9% 8.4% 4.0% 3.8%

Consumption growth n.a 7.3% 10.8% 4.7% 13.0% 7.5% 5.4% 10.1% 8.5% 4.7% 7.4% 3.7% 7.0% 7.9% 7.9%

CPO price (RM/MT) 896 1,343 1,572 1,664 1,395 1,514 2,461 2,856 2,244 2,745 3,283 2,862 2,300 2,800 2,900Source: Oil World, USDA, Deutsche Bank estimates

New land regulations in Indonesia to slow longer-term supply Malaysian mature hectarage of palm plantations and CPO production growth has stagnated for some time. It is now all about Indonesia and possibly Africa longer term, which remains the primary frontier of planting expansion. The Indonesian government issued new regulations on plantations land (Agriculture Minister No. 98 2013) in July 2013 which was implemented in September 2013 states that:

A conglomerate (corporations with related management/partly owned by same major shareholder/legal entity) can only own a max of 100,000 ha of

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plantation land. The restrictions apply to monoculture. Plantation companies can still add new land if the land is used for planting non-palm trees.

Limitation will not apply to State Owned Companies, Regional Owned Companies, Cooperatives or public companies.

The regulation is not retroactive, i.e. existing plantation licenses will remain in force but application for new licenses will be affected. The land cap restriction excludes Papua and West Papua which is capped at 200,000 ha.

The government also requires that a company that has a license in palm oil processing plant divests some of its shares to a farmer cooperative. The divestment will range from 5-30% commencing from the 5th to 15th years of operation.

Plantation companies we spoke to highlighted uncertainties over the new regulations in relation to 1) the 100,000 ha cap on public companies. The current regulation seem to suggest that publically listed companies in Indonesia (AALI, LSIP, IFAR) are exempt from the land cap restrictions while foreign listed companies such as WIL, GGR, KLK, SIME which have significant plantation holdings in Indonesia will be impacted; 2) ability for both foreign and domestic operators to acquire and transfer licenses for plantations (“IUP”), cultivation (“IUP-B”) and processing activities (“IUP-P”) through M&A with private companies that already have existing licenses. More clarity from the Indonesian government on the definitions in the new regulations is required; we believe that it is likely that the overhang will only be addressed after the elections.

As we go through annual reports of listed companies with plantation exposure in Indonesia, we conclude that 1) most of the listed plantation group (WIL, SIME, KLK, GGR, AALI, LSIP, etc.) have already hit/exceeded the 100,000 ha planted area cap and that 2) the rate of new planting has dropped sharply in 2009-11 and expansion is expected to slow in 2014-15 given recent restrictions. This is so as 1) land banking opportunities in Indonesia would become more expensive given the scarcity of plantation land that are already licensed and 2) companies not already listed in Indonesia will need to review the potential need to separately list their Indonesian plantation assets locally in order to expand.

Figure 5: Plantings by major plantation companies in Indonesia ('000 ha) 2005 2006 2007 2008 2009 2010 2011 2012

Golden Agri 286.7 306.9 359.7 391.6 427.3 442.5 455.7 463.4

Indofood Agri 56.0 67.1 161.5 183.1 193.6 205.1 216.8 230.9

Astra Agro - 216.1 235.2 250.9 264.0 263.3 266.7 273.0

Bumitama 33.4 45.9 61.5 75.4 84.8 107.5 118.5 133.4

First Resources 68.6 78.7 86.4 95.2 108.9 120.8 132.3 146.4

Wilmar - 66.4 141.7 160.8 172.1 183.7 182.8 186.6

Sime Darby - - 193.4 202.2 204.2 207.9 204.8 204.5

KL Kepong 41.7 78.3 98.8 106.3 133.1 139.1 139.1 139.7

Bakrie Sumatera - - 43.0 61.1 99.1 115.8 92.2 91.9

BW plantations - - - 27.6 41.4 52.1 60.1 66.4

Total planted area 486.5 859.2 1,381.2 1,554.3 1,728.6 1,837.8 1,869.0 1,936.2

% YoY 0.0% 76.6% 60.7% 12.5% 11.2% 6.3% 1.7% 3.6%

Net add of planted area (ha) - 372.7 521.9 173.1 174.3 109.2 31.2 67.2 Source: Deutsche Bank, company annual reports and only accounts for the planted area in Indonesia

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Figure 6: Mature hectarage in Malaysia has stagnated

Figure 7: Indonesia’s growth likely to slow further with

the new regulations

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Figure 8: Details of the new land regulations in Indonesia Subject Old regulation (made in 2007) Proposed new Regulation (draft dated 16 July 2013)

1 Permissible area for plantation license (“Izin Usaha Perkebunan” -IUP”)

Permissible plantation area for one Company

a. Palm Oil: 100,000 (ha)

b. b. Tea: 10,000 (ha)

c. c. Sugar Cane: 150,000 (ha)

Permissible plantation area for one company or a corporate group

a. Palm Oil: 100,000 (ha)

b. b. Tea: 20,000 (ha)

c. c. Sugar Cane: 150,000 (ha)

2 Permissible area for cultivation of plantation crop

No limitation a. Oil palm: 25 – 1,000 ha

b. Tea: 25 - 240 ha

c. Sugar cane: 25 – 2,000ha

A company that exceeds these limits shall be integrated with industry in processing plantation product.

3 Divestment of shares for processing crude palm oil (“CPO”) plantation

No requirement Requires a (“Izin Usaha Perkebunan untuk Pengolahan: IUP-P”) company which received a processing license to divest some of its shares to a local farmer.

- The stock divestment process shall take place gradually, ranging from 5% to 30%, and

- Commences from the 5th year to the 15th year of operation.

4 Facilitation to local farmers Same as new regulation. Plantation company which is applying for IUP-B or IUP license of 250 ha or more, shall facilitate the formation of farm of at least 20% the total area of IUP-B or IUP.

5 Plantation Partnership Agreement Partnership agreement shall be conducted between the company and farmers, employees and/or local residents for a minimum 3 year term.

Partnership agreement shall be conducted between the company and farmers, employees and/or local residents for a minimum of 4 year term.

6 Requirements to obtain license for increased processing capacity

Plantation company which has received IUP-P or IUP and intends to expand its processing capacity by 30% shall submit a progress report and its financial statements

Plantation company which has received IUP-P or IUP and intends to expand its processing capacity by 30% shall submit a progress report and its financial statements for the prior 3 years.

7 Limitation on land clearing as part of the preparation to form a farm

No requirement Plantation company which has received IUP-B, IUP-P or IUP may prepare to form a farm by clearing the land for seed preparation, seeding, manufacturing facilities and infrastructure at a maximum of 100 ha.

8 Rights to land Plantation company which has received IUP-B, IUP-P or IUP shall resolve the rights over the land within 2 years from the issuance of IUP-B, IUP-P or IUP.

Plantation company which has received IUP-B, IUP-P or IUP and uses state-owned land shall obtain Cultivation Right on Land (“Hak Guna Usaha” or “HGU”) within 2 years from the issuance of IUP-B, IUP-P or IUP.

9 Administrative sanction on divestment

None Plantation company that does not divest its shares to a farmer cooperation will be given 3 warning letters within 4 months to conduct the divestment. In the event the 3rd warning letter is not obeyed, the IUP-P will be revoked and the rights to land will be revoked by the relevant institution.

10 Administrative sanction on rights to land

None Plantation company that does not obtain HGU within 2 years of the issued license will be given 3 warning letters within 4 months to complete the procedure. In the event the 3rd warning letter is not obeyed, the license will be revoked.

11 Administrative sanction on land clearing

None Plantation company that clears land for seed preparation, seeding, manufacturing facilities and infrastructure in excess of 100 ha will receive a warning to cease activities. If within 3 months of issuance of such letter the company has yet to cease land clearing activities the license will be revoked.

12 Transitional provisions No requirements a. Plantation company which has received HGU but not its business licenses before the Proposed Regulation is implemented shall obtain IUP-B, IUP-P, or IUP within 1 year of the Proposed Regulation coming into effect.

b. Plantation company which has received IUP-P before this regulation is implemented shall possess a farm within 3 years.

c. Plantation company which has received IUP-B, IUP-P or IUP before this regulation is implemented and has started to build a farm and/or the processing unit without having the rights to land shall complete the rights in 2 years.

Source: O’Melveny & Myers LLP

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Demand to remain robust; re-stocking activities supportive in the near term We are bullish on palm oil demand in 2014E and 2015E, projecting 7.9% p.a. growth in consumption. The risks to estimates is biased to the upside, a view underpinned by: 1) our upbeat economic outlook for 2014E and 2015E, 2) continued rapid growth in key developing nations such as India and China and 3) positive influence of biodiesel off take globally. Meanwhile, we note that domestic port inventories of palm oil in China have eased to a 20-month low. Re-stocking activities in China and India should be supportive of a stronger CPO price in the near-to-midterm. China and India together account for 26.4% of palm oil demand annually.

Figure 9: World economic growth to sustain palm oil

demand while biodiesel a potent factor for upside

Figure 10: Restocking to drive demand - China palm oil

inventories at domestic ports are at a 20-month low

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Source: Deutsche Bank, World Bank data, Oil World Source: Deutsche Bank, China

Figure 11: World and Asia GDP growth outlook % 2012 2013F 2014F

China 7.8 7.7 8.6

Hong Kong 1.5 3.2 5.0

India 4.1 3.7 5.3

Indonesia 6.2 5.5 5.2

Malaysia 5.6 5.0 6.0

Philippines 6.8 7.0 6.0

Singapore 1.9 2.5 4.0

South Korea 2.1 2.8 3.9

Sri Lanka 6.4 7.0 7.5

Taiwan 1.3 2.0 3.8

Thailand 6.5 4.0 5.0

Vietnam 5.2 5.3 5.8

Emerging Asia* 5.9 5.8 6.8

EM Asia ex China & India* 3.9 3.9 4.7

Euroland 2.8 -0.2 1.2

US 2 1.8 3.2

Japan -0.6 1.8 1.0

World 2.2 2.7 3.7Source: Deutsche Bank estimates, Reuters, Bloomberg Finance LP, World Bank

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Growth in biodiesel demand a potent driver for upside in CPO prices It is worth looking at the impact of a stronger biodiesel off take globally as it can significantly impact the level of inventories of edible oils. The implementation of biodiesel mandates by governments around the world has resulted in biodiesel demand become increasingly inelastic to crude oil prices on the downside. At the same time, any spike in crude oil prices should have a notable impact on biodiesel demand as it would release biodiesel demand from its reliance on government subsidies and mandatory blending targets, we believe. Based on consumption estimates by the International Energy Agency (IEA) and Oil World, the edible oils market is about 4% of the crude oil market while biodiesel demand currently accounts for 0.6% of the crude oil market. If 1% of fuel demand currently satisfied by crude oil spills over to the edible oils market via biodiesel, it would mean a 24% increase in edible oils demand. The leverage is significant, in our view.

Figure 12: Price of crude oil versus global biodiesel production; increasingly

more inelastic

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US$/bbl mMT

Source: Deutsche Bank, EIA, Bloomberg Finance LP

Figure 13: Edible oils market vs. crude oil market – crude oil has tremendous

leverage on edible oils via biodiesel mMT Remarks

Crude oil consumption 4,445.9 Consumption (2012)

Edible oils 188.7 Consumption (2012)

Edible oils as % of crude oil 4.2%

Biodiesel 26.8 Consumption (2012)

Biodiesel as % of crude oil 0.6%

Biodiesel as % of edible oils 14.2% Source: Deutsche Bank, EIA, Oil world

Figure 14: What happens if 1% of crude oil ‘spills over’ to biodiesel? mMT Remarks

Edible oils consumption 233.2 Using above estimates as base

Increase of edible oils demand for biodiesel 44.5 Using above estimates as base

Increase of edible oils demand for biodiesel (%) 23.6%

Biodiesel as % of edible oils 30.6% Source: Deutsche Bank estimates

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Figure 15: Global biodiesel mandates Country Current Mandate (2012) Target Mandate announced in 2013 Comments

Americas

Argentina B7, from B5 in 2010 B10 (2013) High soybean oil prices are delaying the target.

Brazil B5 B10 (2014) and B20 (2020) 82% of Brazil's biodiesel from soybean.

Uruguay B2 B5 (2013) Has a B2 biodiesel policy, but not mandatory.

US 2013 Renewable Fuel Standard: Biomass-based diesel 1.28bn gallons; Renewable Fuel: 16.55bn gallons

Target to have 36bn gallons of renewable fuel blended by 2022.

Biodiesel blenders are also currently eligible for a federal tax credit of $1 per gallon blended. The 1.28bn gallons represent 1.13% volume of non-renewable gasoline and diesel volume. In 2013, about 10% of all fuel used will be from renewable sources. (Biofuel + biomass-based diesel)

Europe

EU Has a 5.75% mandate directive in place 10% renewable energy in all transport fuel Provisional duties imposed in May-13 on biodiesel imported from Argentina and Indonesia.

- Between EUR 217 - 246 per tonne on biodiesel imports from Argentina.

- Between EUR 122 - 179 per tonne on imports from Indonesia. Final duties, which are slightly higher, should be in place by the end of November.

Asia Pacific

Australia B2 (New South Wales) -

China - B10

Fiji - Voluntary B5 (2012), but not happening

India - B20 (2017)

Indonesia B10 About 90% of Indonesia's biodiesel exports of 1.5mkl went to the EU in 2012.

Malaysia B5 B10 (by 2014)

Philippines B2 B5

South Korea B2.5, from B2 this year. - M’sia palm oil imports accounted for 32.2% of South Korea's oil imports during 2010

Thailand B5. from B4 (starting this month) - Source: Biofuels Digest, various press articles

CPO price to play catch-up to competing oils on tightening supply Deutsche Bank and the Oil world continue to expect soybean prices to stay elevated to ensure South American planting and there is also a weather premium given the drought in Argentina which is becoming increasingly more serious. In 2013, CPO price discount widened more than historical averages against most of its competing oils due to the build-up of inventory of CPO and strong production. Given tightening supplies of CPO, we expect the discount gap between CPO vs. soybean oil and rapeseed to narrow, with an upside bias. We are watching supply issues more closely because the CPO price volatility to the stocks/usage ratio has risen strongly over time. This is thanks to a variety of factors: 1) a greater involvement of financial funds in the commodities market; 2) the entry of crude oil into the edible oil equation; 3) rising weather volatility courtesy of global warming and 4) the rise of two main pillars of demand – China and India. Notably the beta of the price of CPO to stocks/usage ratio has increased manifold in the past two decades, suggesting a small shift in this ratio can have a strong impact on prices.

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Figure 16: Deutsche Bank commodities price forecasts 2012 2013E 2014E 2015E 2016E

Brent 111.99 109.00 106.25 105.00 100.00

% YoY chg 3.5% -2.7% -2.5% -1.2% -4.8%

Soybeans (USD/bushel) 14.19 14.15 12.89 10.30 10.13

% YoY chg 18.4% -0.3% -8.9% -20.1% -1.7%

Soybean Oil (USc/lb) 48.50 45.65 43.33 45.83 43.33

% YoY chg -6.6% -5.9% -5.1% 5.8% -5.5%

CPO (RM/MT) 2,900 2,300 2,800 2,900 3,000

% YoY chg -11.80% -20.7% 21.7% 3.6% 3.4%Source: Deutsche Bank estimates, Bloomberg Finance LP, Oil World, USDA

Figure 17: CPO discount gap to soybean oil and rapeseed

oil has remained elevated all of 2013

Figure 18: After an extended period of underperformance

in 2013, CPO are finally catching up to crude oil prices

0

200

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600

800

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1200

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May

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Crude Palm Oil Soyabean Oil Rapeseed Oil

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Jan-00

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Apr-05

Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

Jul-10

Apr-11

Jan-12

Oct-12

Jul-13

CPO (US$/MT) Brent (US$/MT)

US$/MT

Source: Deutsche Bank, Oil World Source: Deutsche Bank, Bloomberg Finance LP, Oil World

Figure 19: CPO price relative to soybean oil prices (%) Figure 20: CPO price relative to rapeseed oil prices (%)

-50%

-40%

-30%

-20%

-10%

0%

10%

Mar

-99

Oct

-00

May

-02

Dec

-03

Jul-0

5

Feb

-07

Sep

-08

Apr

-10

Nov

-11

Jun-

13

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Mar

-99

Oct

-00

May

-02

Dec

-03

Jul-0

5

Feb-

07

Sep

-08

Apr

-10

Nov

-11

Jun-

13

Source: Deutsche Bank, Oil World Source: Deutsche Bank, Oil World

15 November 2013

Consumer



3Q13 results review/preview: another weak quarter

Four (GGR, WIL, LSIP, AALI) out of eight companies in our coverage universe have reported 3Q13 plantation operational results that are below expectations or dismal due to weak CPO prices and slower production growth as a result of adverse weather conditions during the quarter. The trend should be similar for the rest of the Malaysian plantation companies that are due to report results over the next two weeks. As expected, integrated players with substantial downstream, such as KLK, IOI, SIME, FGV and WIL, should outperform purer upstream operators, such as GGR, LSIP and AALI, due to lower feedstock costs and improvements in crushing margins.

Figure 21: Upcoming reporting season Company Expected date of results announcement FYE

KLK 20-Nov 4Q13

IOI Week of 18th Nov 1Q14

FGV 29-Nov 3Q13

SIME 29-Nov 1Q14Source: Deutsche Bank, company

Sector valuations and outlook; GGR, KLK and WIL are our top picks

Our earnings upgrade takes into account changes in 1) our more bullish CPO price forecasts, 2) marginally slower pace of cost of production increases led by lower fertilizer costs which have corrected c.25.1% YoY partially offset by increases in minimum wage in both Indonesia and Malaysia and 3) sustained production growth. As a result of the CPO price upgrade, we have raised earnings by an average of 20% in FY14E and 18% in FY15E and target prices for all stocks under coverage. We upgrade all stocks to Buy.

We prefer stocks with the optimal combination of: 1) the highest palm oil earnings component, 2) highest CPO price sensitivity and 3) liquidity. Our top picks for the sector are GGR and KLK. We also like WIL, not so much as a proxy to raising CPO prices per se but for its market leadership in China, exposure to growing food demand, buoyed by strong economic growth in emerging economies such as China and India. KLK is our preferred pick for Malaysian exposure given the group’s strong plantation output growth profile, large downstream operations and good corporate governance culture. Our earnings estimates for companies under coverage are on average 17-18% ahead of consensus FY14-15E, respectively, due to our more bullish CPO price forecasts and margin recovery.

We continue to use price-to-earnings ratio and discounted cash flow as our main valuations methodologies for the plantation stocks due to the sector’s sustainable earnings growth and strong cash flow generation. We have used sum-of-the-parts valuation for companies with other non-plantation operations. All our valuations are based on one-year forward earnings estimates. Historically, during periods of a CPO price rally, the stocks tend to outperform and break above their mid-cycle valuations. Rolling our valuations 1-year forward and in view of an earnings recovery, margin improvements and a more bullish CPO price outlook, we have raised target prices of all the stocks under our coverage by an average of 44%. We have pegged our price targets on historical average valuations of the respective companies.

15 November 2013

Consumer



Figure 22: Earnings sensitivity NP chg to 1% change in CPO price NP chg to 1% change in CPO

production

FY14 FY15E FY14 FY15E

IOI 1.0% 0.9% 0.9% 0.9%

KLK 1.4% 1.4% 0.8% 0.8%

SIME 1.4% 1.4% 0.5% 0.5%

FGV 2.6% 2.3% 0.5% 0.5%

GGR 3.2% 3.0% 0.7% 0.7%

WIL 0.9% 1.0% 0.2% 0.3%

LSIP 2.1% 2.1% 0.8% 0.8%

AALI 1.8% 1.8% 2.1% 2.1%Source: Deutsche Bank

Figure 23: Historical PER vs. current valuations Peak (2008) Trough

(2009) Mid Current (CY14E) Premium/Discount to

mid-cycle valuations (%)

SIME 18 12 16 14 -16.0%

IOI 26 6 18 18 -1.7%

KLK 24 8 19 18 -5.0%

WIL 19 6 13 11 -12.6%

GGR 25 4 14 12 -16.8%

AALI 21 6 14 13 -10.0%

LSIP 19 3 12 10 -14.4%

CPO price 3,021 2,186 Source: Deutsche Bank

Figure 24: Tree age profile of the plantation companies Planted area age profile - total planted area (ha) FGVH SIME GGR AALI WIL KLK IOI LSIP

Immature (0-3) 72,719 58,348 47,117 38,564 14,930 38,265 18,551 11,075

Young (4-9) 68,679 67,815 91,849 82,131 52,254 55,145 13,543 14,158

Mature (10-20) 64,639 290,493 211,663 152,299 87,713 76,831 106,259 53,025

Old (21+) 197,958 108,669 112,797 na 31,726 22,989 22,273 7,086

Total 403,995 525,325 463,426 272,994 186,623 193,230 160,626 85,344

% of total planted area* FGVH Sime Darby Golden Agri Astra Agro Wilmar KLK IOI Corp LonSum

Immature (0-3) 18.0 11.1 10.2 14.1 8.0 19.8 11.5 13.0

Young (4-9) 17.0 12.9 19.8 30.1 28.0 28.5 8.4 16.6

Mature (10-20) 16.0 55.3 45.7 55.8 47.0 39.8 66.2 62.1

Old (21+) 49.0 20.7 24.3 0.0 17.0 11.9 13.9 8.3

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Deutsche Bank, company data

15 November 2013

Consumer



Figure 25: Changes in our recommendations, earnings and target prices Company Price New Rec Old Rec NP Change (%) 2-year EPS

CAGR Previous TP

PER (x)Implied PER

at TP (x)New TP

(local cy) Old TP

(local cy) TP

changeUpside/

Downside (%)

FY14E FY15E

FGV 4.30 Buy Sell 15.2% 11.7% 26.6% 15.9 18.1 4.80 3.10 54.9% 11.6%

IOI 5.41 Buy Sell 13.4% 22.5% 12.4% 17.0 19.6 6.00 4.10 46.2% 10.9%

KLK 23.20 Buy Sell 14.1% 20.6% 26.4% 18.0 20.9 27.00 17.10 57.9% 16.4%

SIME 9.50 Buy Hold 18.1% 11.2% 7.6% 14.7 15.2 10.60 8.10 30.9% 11.6%

GGR 0.59 Buy Sell 10.1% 3.1% 53.1% 14.2 15.1 0.75 0.50 49.5% 27.8%

WIL 3.55 Buy Hold 7.5% 3.9% 14.2% 13.8 14.1 4.40 3.70 18.9% 23.9%

AALI 21,550 Buy Hold 36.5% 26.8% 42.5% 14.0 14.5 24,300 17,200 41.3% 12.8%

LSIP 1,820 Buy Hold 45.2% 42.4% 38.8% 11.5 12.0 2,030 1,350 50.4% 11.5%Source: Deutsche Bank estimates

Figure 26: Deutsche Bank vs. consensus estimates Local Deutsche

Bank Consensus Estimates

Variance (%)

Currency FYE FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15

Sime Darby* MYR m 06/2013 4,005 4,390 4,641 3,506 3,817 4,097 14% 15% 13%

FGV MYR m 12/2012 668 967 1,071 728 816 875 -8% 19% 22%

IOI Corp* MYR m 06/2013 1,868 2,192 2,362 1,852 2,037 2,202 1% 8% 7%

KLK MYR m 09/2012 964 1,320 1,541 932 1,165 1,281 3% 13% 20%

Wilmar USD m 12/2012 1,369 1,600 1,784 1,320 1,448 1,611 4% 11% 11%

Golden-Agri USD m 12/2012 247 492 579 312 428 509 -21% 15% 14%

LonSum IDR bn 12/2012 605 1,157 1,229 554 778 887 9% 49% 39%

Astra Agro IDR bn 12/2012 1,461 2,643 2,817 1,653 2,234 2,528 -12% 18% 11%Source: Deutsche Bank, Bloomberg Finance LP, *SIME and IOI are based on FY14-16E estimates

Golden Agri: Most leveraged play to CPO price rally

As a result of weaker-than-expected 9M13 earnings, we have cut our FY13 earnings estimates for GGR by 31% and have raised GGR’s FY14-15E earnings by 10% and 3%, respectively, to take into account our new CPO price forecasts and margin improvements on slower cost of production increases. We upgraded the stock to Buy from Sell. This is the stock with by far the largest leverage to CPO price assumptions. It also has the highest risk profile, in our view, as almost 100% of its earnings are from palm oil, be it crude or processed. Every 1% change in CPO price assumption would lead to a 4% change in GGR’s FY14E earnings.

Following our earnings increase in FY14-15E, we have rolled our EPS one year forward and raised our price target for GGR to S$0.75/share. Our revised price target is based on 15x one-year forward PER valuations, close to its historical average. Downside risks to the stock include a bear market in palm oil, large increase in plantation-related costs, notably fertilizers.

Figure 27: GGR - changes in our earnings estimates FYE Dec New Old Change (%)

(US$m) 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E

Sales 6,589 7,386 7,954 6,852 6,721 7,557 -4% 10% 5%

EBITDA 577 924 1,058 700 837 1,005 -18% 10% 5%

EBITDA margin (%) 9% 13% 13% 10% 12% 13% -1% 1% 0%

Net Profit 247 492 579 359 447 562 -31% 10% 3%Source: Deutsche Bank estimates

15 November 2013

Consumer



Kuala Lumpur Kepong: Our preferred Malaysian exposure

We have raised our net earnings forecasts for KLK 14% and 21% in FY14-15E and upgraded the stock to a Buy from Sell. This remains our preferred pick for an integrated Malaysian exposure, stronger earnings growth, upside to target price and the group’s strong plantation output growth profile given a later percentage of maturing hectarage. The latter is a function of its previous investments, especially in Indonesia. Meanwhile, KLK’s balance sheet remains healthy with a net gearing of C. 14% and 15%, respectively, for FY14-15E. This should allow the group to still gear up for opportunistic M&A. Case in point, in light of restricted land-banking opportunities in Indonesia given the new regulations, KLK have started venturing further into Africa and have recently announced the acquisition a majority stake in a Singapore-registered company which owns long-term concessions in Liberia for plantation cultivation.

We have pegged KLK’s price target at 21.2x its 1-year forward PER, in line with its 5-year historical average up-cycle valuation trends. The stock tends to trade at a premium to its Malaysian listed peers due to its strong management track record and favorable tree profile. Key downside risks: A major downturn in CPO or soybean prices, further deterioration in the economy.

Figure 28: KLK – changes in our earnings estimates FYE Sept New Old Change (%)

RMm 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E

Sales 9,939 11,538 12,898 9,939 11,431 12,209 - 1% 6%

EBITDA 1,742 2,269 2,613 1,742 2,050 2,256 - 11% 16%

EBITDA margin (%) 18% 20% 20% 18% 18% 18% - 2% 2%

Net Profit 964 1,320 1,541 964 1,157 1,277 - 14% 21%Source: Deutsche Bank

Wilmar: A proxy to emerging markets’ food demand

We have kept WIL’s FY13E earnings unchanged given in-line 9M13 results and have raised FY14-15E earnings by 8% and 4%, respectively, to take into account stronger CPO prices and stronger sales volume for biodiesel. We have upgraded the stock to Buy (from Hold) as a result of a 26% potential upside suggested by our new price target. The company has the lowest earnings sensitivity to CPO price and should not be played as a direct proxy to the CPO price cycle per se. We are of the view that WIL is a proxy to food demand in Asia. Group earnings are driven by demand, capacity and new business initiatives, i.e. flour and rice in China as well as expansion of its business into Africa and India. Risks to Wilmar’s earnings are driven by volatility of its feedstock costs, trading positions of its edible oils and oilseeds, slim margins and the difficulty in forecasting commodity prices. Given that the group’s strong track record and its market leader position in China’s oilseeds processing industry and dominance in terms of processing palm oil from a global perspective, we give the company the benefit of the doubt that it is able to generate positive returns on its trading positions.

We have raised our SOTP-based target price by 19% to S$4.40 (from S$3.70 previously). We derive our SOTP-based price target by valuing its upstream plantation at 18x FY14E PER, processing divisions at 15x FY14E PER and downstream consumer product at 16x FY14E PER. These multiples are based on peer averages. In addition, we have ascribed a 5% discount at the group

15 November 2013

Consumer



level to factor in risks of diversification into non-core assets. At our price target, WIL would trade at 14x FY14E PER, in line with its 5-year historical average and stronger 2-year earnings CAGR of 14%. Key downside risks for the stock includes changes in regulations for foreign operators in China, losses in trading/hedging of oilseeds and palm oil purchases and an economic slowdown.

Figure 29: WIL – changes in our earnings estimates FYE Dec New Old Change (%)

(US$m) 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E

Sales 44,290 50,184 54,862 44,290 50,059 54,733 - 0.3% 0.2%

EBITDA 2,486 2,823 3,112 2,486 2,684 3,027 - 5.2% 2.8%

EBITDA margin (%) 6% 6% 6% 6% 5% 6% - 0.3% 0.1%

Net Profit 1,369 1,600 1,784 1,369 1,489 1,717 - 7.5% 3.9%Source: Deutsche Bank estimates

Sime Darby: Plantations support earnings growth in FY14E

We have raised Sime’s FY14-15E earnings by 18% and 11%, respectively, and introduced FY16 estimates. Plantations account for c.25% and c.53% of FY14-15E revenues and operating profits, respectively, and should help sustain earnings growth although there is still low visibility on prospects of its other business segments.

We upgrade SIME to Buy from Hold. Our SOTP-derived price target for SIME is based on 18x PER for its plantation operations, 14x PER for property development, 10x PER for Industrial and Energy & Utilities and 12x PER for Automotive. Our new price target implies a 1-year forward valuation of 15x PER. Key downside risks for the stock include economic slowdown affecting SIME’s non-plantation businesses (i.e. property, motors, Caterpillar distribution franchise, etc.), a bear market in palm oil and large increases in plantation-related costs such as labor and fertilizer costs.

Figure 30: SIME – changes in our earnings estimates FYE Jun New Old Change (%)

RMm 2014E 2015E 2016E 2014E 2015E 2014E 2015E

Sales 50,005 53,528 56,655 56,257 56,257 -11% -5%

EBITDA 7,391 8,003 8,534 6,759 7,745 9% 3%

EBITDA margin (%) 15% 15% 15% 12% 14% 3% 1%

Net Profit 4,005 4,390 4,641 3,392 3,947 18% 11%Source: Deutsche Bank estimates

IOI: Waiting for the de-merger of its property and plantation business

Incorporating our new CPO price forecast, we have raised IOI’s FY14-15E earnings by 13% and 23% and introduced our new FY16 forecasts. We have continued to assume the property business in the current listed company as the completion of demerger between the plantations and property business is only expected to complete early 2014. IOI has a low growth profile for its plantations which is mitigated by strong plantation yield management and improving performance of its downstream businesses.

15 November 2013

Consumer



We have raised the stock from a Sell to a Buy. Our RM6/share price target for IOI is based on 20x 1-year forward PER valuations. We are of the view that the up-coming de-merger exercise between its property and plantations business will be supportive of the share price in the near term given the potential upside that an investor who had subscribed to the renounceable offer for sale would enjoy once the property business is listed. For Malaysian plantation exposure, we continue to prefer KLK for greater bottom line sensitivity to CPO price. Downside risks for IOI include overpaying for its acquisitions for growth, delay in the de-merger exercise, a bear market in palm oil and large increases in plantation-related costs such as labor and fertilizer costs.

Figure 31: IOI – changes in our earnings estimates FYE Jun New Old Change (%)

RMm 2014E 2015E 2016E 2014E 2015E 2014E 2015E

Sales 17,116 18,867 20,388 17,837 19,166 -4% -2%

EBITDA 2,890 3,356 3,595 2,755 2,969 5% 13%

EBITDA margin (%) 17% 18% 18% 15% 15% 1% 2%

Net Profit 1,868 2,192 2,362 1,647 1,790 13% 22%Source: Deutsche Bank estimates

Felda Global Ventures: Acquiring for growth

We have kept FGV’s FY13E unchanged and have raised our FY14-15 earnings estimates by 15% and 12%, respectively, taking into account our new CPO price estimates and slight improvements in margins on improved efficiencies. Over the past two months, FGV had announced a series of corporate exercises, most notable were: 1) the RM2.2bn acquisition of 51% stake in Felda Holdings Berhad (FHB) from Koperasi Permodalan Felda (KPF) and 2) RM1.2bn acquisition of Pontian Untied Plantation. We see the move to acquire the 51% stake in FHB as positive as it would allow FGV to consolidate its downstream milling earnings and provide better earnings transparency. The company has one of the highest earnings sensitivities to CPO price changes and we expect its upstream operations to account for c. 75% of operating profits in FY14E.

We have rolled our earnings forward to FY14E and value FGV’s RM4.80 price target based on 18x one-year forward PER valuations, a 10% discount to the larger market cap Malaysian plantation companies due to its less favorable tree age profile (c. 49% of FGV’s palm trees are above 21 years old, this compares to KLK’s 12% and IOI’s 14%) and slower production growth. We upgrade FGV to Buy from Sell. Downside risks for FGV include overpaying for its acquisitions for growth, a bear market in palm oil and large increases in plantation-related costs such as labor and fertilizer costs.

Figure 32: FGV – changes in our earnings estimates FYE Dec New Old Change (%)

RMm 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E

Sales 13,804 15,662 16,835 13,804 14,885 16,113 - 5% 4%

EBITDA 1,504 1,940 2,091 1,504 1,714 1,880 - 13% 11%

EBITDA margin (%) 11% 13% 13% 11% 12% 12% - 1% 1%

Net Profit 668 967 1,071 668 839 959 - 15% 12%Source: Deutsche Bank estimates

15 November 2013

Consumer



London Sumatra: Emerging from a disastrous 2013

We have raised our net earnings forecasts by 39-45% to Rp605bn (-46% YoY) in 2013, Rp1.16tr (+91% YoY) in 2014, and Rp1.23tr (+6% YoY) in 2015. Our earnings upgrade for this year can be attributed to FX gain from its cash holding following the strengthening of the US dollar, especially in 3Q13. Meanwhile, the big jump in 2014E and 2015E earnings are mainly contributed by our higher CPO price assumption: RM2,300/ton in 2013F (no change), RM2,800/ton in 2014F (+8%), RM2,900/ton in 2015F (+7%), and RM3,000/ton in 2016F (+11%). Finally, we have also decreased the total cost/ton in 2013-15F due to expectation of lower fertilizer cost.

Overall, we now have a Buy rating on the stock to reflect higher CPO price going forward, and also slight production recovery. Indeed we believe the market has taken into account the company's poor operating performance this year since the stock is still down by 24% YTD (underperformed the IDX by almost 30%), and this is despite having rebounded by 50% in the past three months following the strengthening of the US dollar. Finally, we see potentially larger upside through re-rating in the event that the company can come up with higher-than-expected production recovery; not to mention also that the stock is two times more liquid than peers, such as Astra Agro. Any key risks will come from further decline in production yield, which has disappointed for two years in a row. Note that our target price is based on 11.5x earnings in 2014F, still below the historical average and at a discount to its peers due to the company's poor operating performance in the past two years.

Figure 33: LSIP – changes in our earnings estimates FYE Dec New Old Change (%)

Rp bn 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E

Sales 3,962 4,998 5,275 3,986 4,710 5,109 -1% 6% 3%

EBITDA 935 1,667 1,749 771 1,185 1,274 21% 41% 37%

EBITDA margin (%) 24% 33% 33% 19% 25% 25% 4% 8% 8%

Net Profit 605 1,157 1,229 437 796 863 39% 45% 42%Source: Deutsche Bank estimates

Astro Agro: Downstream expansion risks and not a beneficiary of stronger USD

We keep our net earnings forecast roughly unchanged at Rp1.5tr (-39% YoY) in 2013, but also raise it by 36% to Rp2.64tr (+81% YoY) in 2014F, and by 27% to Rp2.82tr (+7% YoY) in 2015F. Although we have taken into account the stronger US dollar, this has been offset by FX loss amid US dollar debt and thus explains our roughly unchanged earnings for this year. Meanwhile, the big increase in 2014E and 2015E earnings were also mainly driven by our higher CPO price assumption: RM2,300/ton in 2013F (no change), RM2,800/ton in 2014F (+8%), RM2,900/ton in 2015F (+7%), and RM3,000/ton in 2016F (+11%). Nonetheless, these were slightly offset by higher production cost/ton caused by a rise in raw material costs (higher palm oil price) since the company buys a lot of plasma and third-party purchases to utilize its new CPO mills.

Overall, we also have a Buy rating on this stock and this is predicated upon a higher CPO price going forward. The stock has so far held up well since it rebounded by 37% in the past three months, and is now up by 6% YTD (roughly at par with the IDX). This is not surprising as the company has one of

15 November 2013

Consumer



the highest production yields in Indonesia among peers, and we consider the stock to be a comparatively safer investment given its good track record. Note that our target price is based on 14x earnings in 2014E, which is roughly in line with the historical average.

Figure 34: AALI – changes in our earnings estimates FYE Dec New Old Change (%)

Rp bn 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E

Sales 11,542 14,817 15,814 11,248 12,861 13,432 3% 15% 18%

EBITDA 3,051 4,859 5,203 2,928 3,571 3,976 4% 36% 31%

EBITDA margin (%) 26% 33% 33% 26% 28% 30% 0% 5% 3%

Net Profit 1,461 2,643 2,817 1,493 1,936 2,221 -2% 36% 27%Source: Deutsche Bank estimates

Asian

Palm

Oil In

du

stry

Co

nsu

mer

15

No

vemb

er 20

13

Deu

tsche B

ank A

G/H

on

g K

on

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Figure 35: Peer valuation sheet

DB Plantation Sector ValuationsCompany BBG Rec Pr ice TP M Cap ADTV FYE

14-Nov-13 Code (LC) (LC) (US$m) (US$m) 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F 12 13F 14F 1w 1m 3m 6m 1y YTDMa lay s ia

Sime Darby Bhd SIME MK Buy 9.49 10.60 17,772 17.8 06/2013 15.2 15.7 13.6 -2.8 0.4 14.3 2.2 2.0 1.9 3.6 3.7 4.1 15.2 14.1 14.5 -0.1 0.4 0.1 -1.1 -1.4 -0.3

IOI Corp IOI MK Buy 5.41 6.00 10,796 7.9 06/2013 18.3 19.4 17.7 -3.8 5.5 13.5 2.6 2.5 2.3 3.0 3.0 3.3 14.8 14.8 15.1 0.2 0.6 -0.7 -0.9 8.9 6.1

Kuala Lumpur Kepong KLK MK Buy 23.12 27.00 7,666 4.4 09/2012 23.3 24.2 19.4 -16.4 -1.9 24.5 3.3 3.2 3.0 2.6 2.3 2.9 16.1 13.8 16.0 -1.2 1.4 9.0 5.7 11.2 -3.7

Felda Global Ventures FGV MK Buy 4.30 4.75 4,866 2.3 12/2012 22.1 23.8 16.1 -39.3 -17.1 47.5 2.8 2.4 2.2 2.9 2.1 3.1 13.8 10.4 14.4 -0.9 1.2 -2.7 -5.5 -7.5 -6.9

Genting Plantations* GENP MK NR 11.06 - 2,616 0.9 12/2012 21.2 30.1 21.8 -26.0 -14.8 38.1 2.0 2.3 2.1 1.1 0.9 1.1 9.9 7.5 9.4 0.9 12.6 12.9 22.9 31.0 23.3

Kulim* KUL MK NR 3.62 - 1,443 0.4 12/2012 5.7 30.9 20.1 44.5 -82.4 53.8 1.3 0.9 0.9 2.0 14.0 1.7 20.2 3.5 10.8 0.8 10.7 0.0 0.3 -8.1 -8.9

United Plantations* UPL MK NR 26.88 - 1,744 0.1 12/2012 14.6 21.9 18.0 -8.3 -25.8 21.6 2.3 2.5 2.3 2.3 2.1 2.5 16.5 12.0 13.1 1.1 1.1 2.1 -1.0 9.9 9.2

Sarawak Oil Palms* SOP MK NR 5.90 - 806 0.2 12/2012 17.7 21.9 14.8 -35.6 -25.0 48.1 2.4 2.0 1.8 0.7 0.7 1.0 12.1 7.7 18.0 0.0 3.3 5.7 4.4 -3.3 2.4

IJM Plantations* IJMP MK NR 3.30 - 825 0.2 03/2013 21.5 18.0 15.7 -2.2 21.3 14.1 1.8 1.7 1.6 2.1 2.5 2.8 8.7 9.0 10.4 2.2 8.2 8.2 8.6 9.6 10.7

TSH Resources* TSH MK NR 2.71 - 758 0.2 12/2012 24.8 26.1 18.4 -35.5 11.3 41.3 2.1 2.3 2.1 1.1 1.2 1.3 8.9 11.7 11.1 6.7 10.6 18.3 19.4 17.8 24.9

Ma lays ia average 18.2 20.3 16.6 -9.8 -4.6 22.6 2.5 2.3 2.2 2.9 3.2 3.2 14.8 12.9 14.4 0.0 2.0 2.3 1.4 4.6 1.9

S ingapore

Wilmar International WIL SP Buy 3.55 4.40 17,761 17.2 12/2012 16.2 13.0 11.1 -19.8 9.1 16.9 1.2 1.2 1.1 1.3 1.5 1.8 9.1 9.2 9.9 2.9 9.2 13.8 5.0 13.4 6.3

Golden Agri-Resources GGR SP Buy 0.59 0.75 5,670 20.5 12/2012 17.1 22.1 11.1 -30.9 -38.5 100.0 0.8 0.7 0.6 2.2 1.4 2.7 4.9 3.0 5.7 0.9 11.4 14.7 4.5 -4.9 -10.0

First Resources* FR SP NR 2.15 - 2,727 3.7 12/2012 10.0 13.5 11.9 13.6 -16.8 13.8 2.2 2.1 1.9 2.1 2.0 2.2 23.8 16.6 16.6 4.9 15.6 24.3 15.9 3.4 6.4

Indofood Agri* IFAR SP NR 0.90 - 1,021 1.8 12/2012 14.3 23.1 13.6 -34.1 -59.9 69.2 1.1 0.8 0.7 0.6 0.7 0.8 7.9 3.3 5.2 1.7 13.2 8.4 -18.2 -25.6 -32.6

Bumitama Agri* BAL SP NR 0.99 - 1,386 0.5 12/2012 12.8 20.1 13.7 8.1 -38.3 46.9 2.9 2.8 2.4 0.0 0.9 1.3 20.8 14.6 18.2 -1.0 -0.5 4.8 -2.0 -5.3 -6.6

Mewah International* MII SP NR 0.48 - 573 0.4 12/2012 22.7 29.7 19.8 -41.8 -21.9 50.0 1.0 1.0 1.0 1.8 0.4 0.6 4.5 3.4 5.1 0.0 3.3 13.1 1.1 13.1 -13.6

S ingapore average 15.7 15.8 11.6 -18.4 -7.9 36.7 1.3 1.2 1.1 1.5 1.4 1.9 10.1 8.6 9.8 2.4 9.8 14.3 4.7 6.7 0.8

Indones ia

Astra Agro Lestari AALI IJ Buy 21550 24,300 2,884 2.5 12/2012 13.9 22.8 12.6 0.2 -38.0 29.6 3.4 3.5 3.1 3.5 2.2 2.0 28.1 15.7 25.3 2.4 2.1 45.1 24.6 4.1 9.4

Salim Ivomas* SIMP IJ NR 820 - 1,136 1.1 12/2012 17.6 38.4 18.1 -36.5 -70.7 112.6 1.5 1.0 0.9 1.6 2.0 1.1 8.8 2.6 4.7 0.0 6.5 15.5 2.5 -26.1 -28.7

London Sumatra LSIP IJ Buy 1820 2,030 1,008 4.9 12/2012 15.6 19.3 10.1 -34.4 -45.8 91.1 2.5 1.8 1.6 2.6 2.1 4.0 18.4 9.5 16.8 -27.7 25.5 58.3 19.0 -20.9 -20.9

Sampoerna Agro* SGRO IJ NR 1800 - 298 0.2 12/2012 16.9 34.3 13.7 -39.2 -69.8 150.6 2.2 1.3 1.2 1.5 1.8 1.7 13.3 3.6 8.3 -1.1 0.0 9.1 -6.3 -24.2 -28.0

BW Plantation* BWPT IJ NR 1220 - 433 1.9 12/2012 22.3 24.9 15.2 -18.3 -24.5 64.5 3.4 2.7 2.3 0.8 0.9 1.0 20.3 12.0 16.2 19.6 31.2 69.4 24.5 -12.2 -11.6

Indones ia average 15.7 26.0 13.5 -16.5 -46.5 65.6 2.8 2.5 2.2 2.7 2.0 2.1 21.2 11.1 18.2 -2.2 9.2 41.5 17.6 -8.9 -6.9

UK-lis ted

New Britain Palm Oil NBPO LN Buy 440 650 1,046 0.3 12/2012 32.1 24.4 16.8 -73.3 -20.4 45.4 1.3 1.0 1.0 1.3 0.9 1.3 0.1 4.3 6.0 4.8 10.4 -8.3 18.1 -16.2 -12.9

As ia average 17.3 19.2 14.6 -14.0 -8.8 30.6 2.1 2.0 1.8 2.4 2.5 2.7 13.4 11.2 13.0 0.7 5.3 8.9 3.9 4.1 0.7

14-Nov-13Shr px per f (%)EPS growth (%)Ca l PE (x) Div Yield (%) ROE (%)P/BV (x)

Source: Deutsche Bank, Bloomberg Finance LP. Note: *denotes Bloomberg consensus estimates, rest covered by DB. All valuation metrics are calendarized and CY12 PER, PBR and DY% all based on average share price in 2012. Averages are market cap weighted.

15 November 2013

Consumer



Model updated:14 November 2013

Running the numbers

Asia

Indonesia

Agriculture

London Sumatra Reuters: LSIP.JK Bloomberg: LSIP IJ

Buy Price (13 Nov 13) IDR 1,710

Target Price IDR 2,030

52 Week range IDR 1,000 - 2,500

Market Cap (bn) IDRm 11,667

USDm 1,007

Company Profile

London Sumatra (LSIP) was formed in 1906, making it one of the longest established plantation companies in Indonesia. The company's main products include crude palm oil (CPO) and rubber, and it is amongst the main beneficiaries of the growing demand for palm oil arising from increased consumption in cooking oil.

Price Performance

800120016002000240028003200

Nov 11Feb 12May 12Aug 12Nov 12Feb 13May 13Aug 13

London SumatraJakarta Comp. Index (Rebased)

Margin Trends

10

20

30

40

50

10 11 12 13E 14E 15E

EBITDA Margin EBIT Margin

Growth & Profitability

05101520253035

-20-10

010203040

10 11 12 13E 14E 15E

Sales growth (LHS) ROE (RHS)

Solvency

-40

-30

-20

-10

0

10 11 12 13E 14E 15E

Net debt/equity (LHS) Net interest cover (RHS)

Jovin Ng +62 21 2964 4518 [email protected]

Fiscal year end 31-Dec 2010 2011 2012 2013E 2014E 2015E

Financial Summary

DB EPS (IDR) 151.45 249.39 163.59 88.71 169.52 180.09Reported EPS (IDR) 151.45 249.39 163.59 88.71 169.52 180.09DPS (IDR) 61.00 100.00 66.00 35.57 67.97 72.21BVPS (IDR) 667.5 855.9 920.5 942.2 1,076.1 1,188.2

Weighted average shares (m) 6,823 6,823 6,823 6,823 6,823 6,823Average market cap (IDRbn) 13,137 15,568 17,393 11,667 11,667 11,667Enterprise value (IDRbn) 11,977 13,504 15,451 10,611 10,017 9,423

Valuation Metrics

P/E (DB) (x) 12.7 9.1 15.6 19.3 10.1 9.5P/E (Reported) (x) 12.7 9.1 15.6 19.3 10.1 9.5P/BV (x) 3.85 2.63 2.50 1.81 1.59 1.44

FCF Yield (%) 7.8 8.1 2.9 nm 7.2 9.1Dividend Yield (%) 3.2 4.4 2.6 2.1 4.0 4.2

EV/Sales (x) 3.3 2.9 3.7 2.7 2.0 1.8EV/EBITDA (x) 7.5 6.1 10.1 11.4 6.0 5.4EV/EBIT (x) 8.6 6.8 12.1 16.5 7.4 6.7

Income Statement (IDRbn)

Sales revenue 3,593 4,686 4,212 3,962 4,998 5,275Gross profit 1,975 2,600 1,935 1,387 2,162 2,292EBITDA 1,603 2,230 1,530 935 1,667 1,749Depreciation 204 237 254 292 317 338Amortisation 0 0 0 0 0 0EBIT 1,400 1,993 1,276 643 1,350 1,410Net interest income(expense) -1 87 85 47 75 104Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries 0 0 0 0 0 0Other pre-tax income/(expense) -17 11 11 115 0 0Profit before tax 1,382 2,091 1,372 805 1,425 1,514Income tax expense 348 389 257 201 271 288Minorities 0 0 -1 -1 -2 -2Other post-tax income/(expense) 0 0 0 0 0 0Net profit 1,033 1,702 1,116 605 1,157 1,229

DB adjustments (including dilution) 0 0 0 0 0 0DB Net profit 1,033 1,702 1,116 605 1,157 1,229

Cash Flow (IDRbn)

Cash flow from operations 1,419 1,645 1,307 830 1,467 1,571Net Capex -394 -388 -801 -1,124 -632 -513Free cash flow 1,025 1,257 505 -294 835 1,058Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -285 -416 -682 -450 -243 -464Net inc/(dec) in borrowings -213 0 0 0 0 0Other investing/financing cash flows -49 63 -88 0 0 0Net cash flow 478 903 -265 -744 593 594Change in working capital 167 -207 22 47 -8 4

Balance Sheet (IDRbn)

Cash and other liquid assets 1,161 2,064 1,799 1,055 1,648 2,242Tangible fixed assets 3,748 3,901 4,474 5,306 5,621 5,796Goodwill/intangible assets 0 0 0 0 0 0Associates/investments 0 0 142 0 0 0Other assets 653 827 1,137 1,391 1,535 1,608Total assets 5,561 6,792 7,552 7,752 8,804 9,646Interest bearing debt 0 0 0 0 0 0Other liabilities 1,007 952 1,272 1,325 1,464 1,541Total liabilities 1,007 952 1,272 1,325 1,464 1,541Shareholders' equity 4,554 5,839 6,280 6,428 7,342 8,107Minorities 0 0 -1 -1 -2 -2Total shareholders' equity 4,554 5,839 6,280 6,427 7,340 8,105Net debt -1,161 -2,064 -1,799 -1,055 -1,648 -2,242

Key Company Metrics

Sales growth (%) 12.3 30.4 -10.1 -5.9 26.1 5.5DB EPS growth (%) 46.1 64.7 -34.4 -45.8 91.1 6.2EBITDA Margin (%) 44.6 47.6 36.3 23.6 33.4 33.2EBIT Margin (%) 39.0 42.5 30.3 16.2 27.0 26.7Payout ratio (%) 40.3 40.1 40.3 40.1 40.1 40.1ROE (%) 24.7 32.7 18.4 9.5 16.8 15.9Capex/sales (%) 11.0 8.4 19.1 28.4 12.6 9.7Capex/depreciation (x) 1.9 1.7 3.2 3.9 2.0 1.5Net debt/equity (%) -25.5 -35.3 -28.6 -16.4 -22.4 -27.7Net interest cover (x) nm nm nm nm nm nm

Source: Company data, Deutsche Bank estimates

15 November 2013

Consumer




Running the numbers

Asia

Singapore

Agriculture

Wilmar International Reuters: WLIL.SI Bloomberg: WIL SP

Buy Price (14 Nov 13) SGD 3.55

Target Price SGD 4.40

52 Week range SGD 3.05 - 3.89

Market Cap (m) SGDm 22,706

USDm 18,206

Company Profile

Wilmar International Ltd. is involved in oil palm cultivation and milling. The Company refines, processes, brands, trades and distributes palm oil and lauric related products. In addition, Wilmar International trades and processes soya bean, crude soya bean oil, grains, sugar and fertiliser.

Price Performance

2.0

3.0

4.0

5.0

6.0

7.0


Wilmar InternationalStraits Times Index (Rebased)

Margin Trends

3.0

4.0

5.0

6.0

7.0

10 11 12 13E 14E 15E



02468101214

-100

1020304050

10 11 12 13E 14E 15E


Solvency

0

5

10

15

20

25

0

20

40

60

80

100

10 11 12 13E 14E 15E


Michelle Foong +60 3 2053 6769 [email protected]


Financial Summary

DB EPS (USD) 0.20 0.24 0.20 0.21 0.25 0.28Reported EPS (USD) 0.20 0.24 0.20 0.21 0.25 0.28DPS (USD) 0.04 0.05 0.04 0.04 0.05 0.06BVPS (USD) 1.9 2.1 2.2 2.4 2.6 2.8

Weighted average shares (m) 6,397 6,401 6,401 6,401 6,401 6,401Average market cap (USDm) 29,650 26,944 20,288 18,206 18,206 18,206Enterprise value (USDm) 45,838 46,559 41,153 41,463 42,895 44,425

Valuation Metrics


FCF Yield (%) nm 1.7 nm 0.6 4.2 4.0Dividend Yield (%) 0.9 1.2 1.3 1.5 1.8 2.0


Income Statement (USDm)

Sales revenue 30,378 44,710 45,463 44,290 50,184 54,862Gross profit 2,507 3,871 3,891 4,429 5,018 5,486EBITDA 1,995 2,631 2,252 2,486 2,823 3,112Depreciation 315 478 543 600 646 692Amortisation 0 0 0 0 0 0EBIT 1,679 2,153 1,709 1,886 2,177 2,419Net interest income(expense) -73 -259 -178 -214 -218 -232Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries 0 0 0 0 0 0Other pre-tax income/(expense) 38 185 123 129 140 151Profit before tax 1,644 2,079 1,655 1,801 2,098 2,339Income tax expense 190 379 334 360 420 468Minorities 131 99 65 71 79 86Other post-tax income/(expense) 0 0 0 0 0 0Net profit 1,324 1,601 1,255 1,369 1,600 1,784

DB adjustments (including dilution) 0 0 0 0 0 0DB Net profit 1,324 1,601 1,255 1,369 1,600 1,784

Cash Flow (USDm)

Cash flow from operations -2,319 1,948 1,068 1,288 1,728 1,656Net Capex -997 -1,482 -1,690 -1,171 -959 -931Free cash flow -3,316 466 -622 117 770 725Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -385 -312 -299 -274 -320 -357Net inc/(dec) in borrowings 5,835 3,762 8,079 2,450 1,494 1,594Other investing/financing cash flows -2,127 -3,037 -6,909 0 0 0Net cash flow 8 879 249 2,293 1,943 1,963Change in working capital -3,926 22 -581 -864 -734 -1,036

Balance Sheet (USDm)

Cash and other liquid assets 6,788 7,898 8,562 10,855 12,798 14,761Tangible fixed assets 7,624 9,315 10,894 8,997 9,310 9,548Goodwill/intangible assets 4,401 4,410 4,458 4,458 4,458 4,458Associates/investments 2,214 2,369 2,676 2,805 2,945 3,095Other assets 12,943 15,647 15,330 18,371 19,031 19,948Total assets 33,969 39,640 41,920 45,486 48,542 51,812Interest bearing debt 17,425 20,889 22,245 24,695 26,189 27,783Other liabilities 3,986 4,502 4,480 4,429 4,632 4,794Total liabilities 21,412 25,391 26,725 29,124 30,821 32,577Shareholders' equity 11,856 13,370 14,346 15,441 16,721 18,149Minorities 702 878 849 921 999 1,086Total shareholders' equity 12,558 14,248 15,195 16,362 17,721 19,235Net debt 10,637 12,991 13,683 13,840 13,391 13,022

Key Company Metrics

Sales growth (%) 27.2 47.2 1.7 -2.6 13.3 9.3DB EPS growth (%) -29.8 20.9 -19.8 9.1 16.9 11.5EBITDA Margin (%) 6.6 5.9 5.0 5.6 5.6 5.7EBIT Margin (%) 5.5 4.8 3.8 4.3 4.3 4.4Payout ratio (%) 19.7 19.5 20.6 20.0 20.0 20.0ROE (%) 11.6 12.7 9.1 9.2 9.9 10.2Capex/sales (%) 3.3 3.3 3.7 2.6 1.9 1.7Capex/depreciation (x) 3.2 3.1 3.1 2.0 1.5 1.3Net debt/equity (%) 84.7 91.2 90.0 84.6 75.6 67.7Net interest cover (x) 23.0 8.3 9.6 8.8 10.0 10.4


15 November 2013

Consumer




Running the numbers

Asia

Singapore

Agriculture

Golden Agri-Resources Reuters: GAGR.SI Bloomberg: GGR SP

Buy Price (14 Nov 13) SGD 0.59

Target Price SGD 0.75

52 Week range SGD 0.51 - 0.68

Market Cap (m) SGDm 7,271

USDm 5,830

Company Profile

Golden Agri-Resources Limited cultivates, harvests, processes, distributes, and sells crude palm oil and palm kernel. The Company also refines crude palm oil into cooking oil, margarine, and shortening for sale and distribution.

Price Performance

0.5

0.6

0.7

0.8

0.9


Golden Agri-ResourcesStraits Times Index (Rebased)

Margin Trends

4

8

12

16

20

10 11 12 13E 14E 15E



0

2

4

6

8

10

0

20

40

60

80

10 11 12 13E 14E 15E


Solvency

0

5

10

15

20

0

5

10

15

20

25

10 11 12 13E 14E 15E




Financial Summary

DB EPS (USD) 0.03 0.05 0.03 0.02 0.04 0.05Reported EPS (USD) 0.03 0.05 0.03 0.02 0.04 0.05DPS (USD) 0.01 0.02 0.01 0.01 0.01 0.01BVPS (USD) 0.6 0.7 0.7 0.7 0.7 0.8

Weighted average shares (m) 12,139 12,139 12,430 12,430 12,430 12,430Average market cap (USDm) 5,312 6,583 6,908 5,830 5,830 5,830Enterprise value (USDm) 6,357 7,663 8,728 7,818 8,199 8,285

Valuation Metrics


FCF Yield (%) nm 3.1 nm nm 1.3 5.2Dividend Yield (%) 1.8 3.4 2.2 1.3 2.6 3.1


Income Statement (USDm)

Sales revenue 3,505 5,953 6,052 6,589 7,399 7,991Gross profit 626 892 744 588 948 1,091EBITDA 626 892 744 588 948 1,091Depreciation 82 95 116 133 149 161Amortisation 0 0 0 0 0 0EBIT 544 797 628 455 799 930Net interest income(expense) -41 -53 -67 -106 -111 -116Associates/affiliates 4 1 0 0 0 0Exceptionals/extraordinaries -6 6 -24 0 0 0Other pre-tax income/(expense) 33 33 56 0 0 0Profit before tax 534 784 594 349 688 814Income tax expense 139 202 184 87 172 204Minorities 8 10 6 6 6 6Other post-tax income/(expense) 0 0 0 0 0 0Net profit 387 571 404 256 510 605

DB adjustments (including dilution) 0 0 0 0 0 0DB Net profit 387 571 404 256 510 605

Cash Flow (USDm)

Cash flow from operations 167 651 343 352 602 733Net Capex -324 -446 -410 -706 -528 -432Free cash flow -156 204 -68 -354 73 301Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -45 -79 -244 -77 -153 -181Net inc/(dec) in borrowings 301 102 769 505 101 105Other investing/financing cash flows -218 -156 -145 -80 -50 -50Net cash flow -118 70 311 -6 -29 175Change in working capital -251 0 -119 -49 -74 -54

Balance Sheet (USDm)

Cash and other liquid assets 218 277 560 553 524 699Tangible fixed assets 1,459 1,759 2,007 2,424 2,675 2,814Goodwill/intangible assets 128 121 118 118 118 118Associates/investments 103 184 657 645 658 672Other assets 8,206 9,497 9,944 10,379 10,845 11,276Total assets 10,114 11,837 13,286 14,119 14,820 15,579Interest bearing debt 984 1,086 1,854 1,992 2,367 2,445Other liabilities 2,185 2,639 2,813 3,297 3,263 3,573Total liabilities 3,169 3,725 4,668 5,289 5,630 6,018Shareholders' equity 6,826 8,025 8,527 8,734 9,088 9,452Minorities 119 87 92 96 102 110Total shareholders' equity 6,945 8,112 8,618 8,830 9,191 9,562Net debt 766 809 1,295 1,439 1,843 1,746

Key Company Metrics

Sales growth (%) nm 69.9 1.7 8.9 12.3 8.0DB EPS growth (%) na 47.6 -30.9 -36.7 99.3 18.5EBITDA Margin (%) 17.9 15.0 12.3 8.9 12.8 13.7EBIT Margin (%) 15.5 13.4 10.4 6.9 10.8 11.6Payout ratio (%) 24.1 39.1 37.7 30.0 30.0 30.0ROE (%) 6.3 7.7 4.9 3.0 5.7 6.5Capex/sales (%) 9.2 7.5 6.8 10.7 7.1 5.4Capex/depreciation (x) 3.9 4.7 3.5 5.3 3.5 2.7Net debt/equity (%) 11.0 10.0 15.0 16.3 20.0 18.3Net interest cover (x) 13.3 14.9 9.4 4.3 7.2 8.0


15 November 2013

Consumer




Running the numbers

Asia

Malaysia

Agriculture

IOI Corp Reuters: IOIB.KL Bloomberg: IOI MK

Buy Price (14 Nov 13) MYR 5.41

Target Price MYR 6.00

52 Week range MYR 4.60 - 5.60

Market Cap (m) MYRm 34,811

USDm 10,846

Company Profile

IOI Corp cultivates oil palm plantations and processes the oil into downstream products. The Company is also involved in property development in Malaysia and Singapore.

Price Performance

4.4

4.8

5.2

5.6

6.0

6.4


IOI Corp KLSE COMPOSITE (Rebased)

Margin Trends

15.0

16.0

17.0

18.0

19.0

11 12 13 14E 15E 16E



0

5

10

15

20

25

-20

-10

0

10

20

30

11 12 13 14E 15E 16E


Solvency

0

5

10

15

20

25

05

101520253035

11 12 13 14E 15E 16E



Fiscal year end 30-Jun 2011 2012 2013 2014E 2015E 2016E

Financial Summary

DB EPS (MYR) 0.30 0.30 0.26 0.28 0.33 0.36Reported EPS (MYR) 0.34 0.27 0.30 0.31 0.36 0.39DPS (MYR) 0.17 0.16 0.15 0.16 0.19 0.20BVPS (MYR) 1.9 2.0 2.1 2.3 2.5 2.7

Weighted average shares (m) 6,414 6,427 6,434 6,434 6,434 6,434Average market cap (MYRm) 35,460 32,914 32,489 34,811 34,811 34,811Enterprise value (MYRm) 36,055 35,335 39,280 41,623 41,798 42,004

Valuation Metrics


FCF Yield (%) 1.5 5.3 8.2 1.8 3.5 4.1Dividend Yield (%) 3.1 3.0 3.0 3.0 3.5 3.7


Income Statement (MYRm)

Sales revenue 16,154 15,640 13,517 17,116 18,867 20,388Gross profit 3,059 2,622 2,531 2,890 3,356 3,595EBITDA 3,059 2,622 2,531 2,890 3,356 3,595Depreciation 243 255 251 256 270 283Amortisation 0 0 0 0 0 0EBIT 2,816 2,367 2,280 2,634 3,086 3,312Net interest income(expense) -123 -141 -227 -323 -372 -398Associates/affiliates 171 154 193 213 234 257Exceptionals/extraordinaries 0 0 260 200 200 200Other pre-tax income/(expense) 0 0 0 0 0 0Profit before tax 2,864 2,379 2,507 2,723 3,148 3,371Income tax expense 573 550 512 626 724 775Minorities 68 39 25 29 32 34Other post-tax income/(expense) 0 0 0 0 0 0Net profit 2,223 1,789 1,970 2,068 2,392 2,562

DB adjustments (including dilution) -215 203 -260 -200 -200 -200DB Net profit 2,007 1,992 1,710 1,868 2,192 2,362

Cash Flow (MYRm)

Cash flow from operations 910 2,132 3,136 1,094 1,670 1,883Net Capex -378 -385 -458 -450 -450 -450Free cash flow 531 1,746 2,679 644 1,220 1,433Equity raised/(bought back) 0 -140 0 0 0 0Dividends paid -1,151 -991 -990 -1,034 -1,196 -1,281Net inc/(dec) in borrowings 1,932 2,724 -797 727 753 805Other investing/financing cash flows -1,035 -1,524 200 200 200 200Net cash flow 277 1,816 1,091 536 977 1,157Change in working capital 3,216 3,090 2,061 2,610 2,877 3,109

Balance Sheet (MYRm)

Cash and other liquid assets 2,786 4,361 2,969 3,506 4,483 5,639Tangible fixed assets 5,677 5,714 5,294 5,488 5,668 5,835Goodwill/intangible assets 512 512 429 429 429 429Associates/investments 5,066 5,989 813 1,548 2,158 2,790Other assets 5,614 6,489 14,396 15,074 15,554 15,987Total assets 19,655 23,065 23,902 26,045 28,291 30,680Interest bearing debt 5,398 8,122 7,324 8,051 8,804 9,608Other liabilities 1,996 2,027 2,625 2,979 3,245 3,514Total liabilities 7,394 10,149 9,950 11,030 12,048 13,122Shareholders' equity 11,999 12,628 13,672 14,706 15,902 17,183Minorities 262 288 280 309 341 375Total shareholders' equity 12,261 12,916 13,952 15,015 16,243 17,558Net debt 2,612 3,761 4,355 4,545 4,321 3,969

Key Company Metrics

Sales growth (%) nm -3.2 -13.6 26.6 10.2 8.1DB EPS growth (%) na -0.8 -14.2 9.2 17.3 7.7EBITDA Margin (%) 18.9 16.8 18.7 16.9 17.8 17.6EBIT Margin (%) 17.4 15.1 16.9 15.4 16.4 16.2Payout ratio (%) 49.0 55.7 49.0 49.8 51.1 50.2ROE (%) 19.5 14.5 15.0 14.6 15.6 15.5Capex/sales (%) 2.3 2.5 3.4 2.6 2.4 2.2Capex/depreciation (x) 1.6 1.5 1.8 1.8 1.7 1.6Net debt/equity (%) 21.3 29.1 31.2 30.3 26.6 22.6Net interest cover (x) 22.9 16.7 10.0 8.2 8.3 8.3


15 November 2013

Consumer




Running the numbers

Asia

Malaysia

Agriculture

Kuala Lumpur Kepong Reuters: KLKK.KL Bloomberg: KLK MK



52 Week range MYR 20.26 - 24.00


USDm 7,672

Company Profile

Kuala Lumpur Kepong Berhad produces and processes palm products, natural rubber, and cocoa on its plantations. Through its subsidiaries, the company mills and refines oil palm products, cultivates ramie, and manufactures oleochemicals, soap, esters, latex gloves, toiletries, and parquet flooring products. Kuala Lumpur Kepong also develops properties and operates holiday bungalows.

Price Performance

20

21

23

24

26

27


Kuala Lumpur KepongKLSE COMPOSITE (Rebased)

Margin Trends

1214

1618

2022

10 11 12 13E 14E 15E



051015202530

-100

1020304050

10 11 12 13E 14E 15E


Solvency

0

10

20

30

40

50

0

5

10

15

20

10 11 12 13E 14E 15E



Fiscal year end 30-Sep 2010 2011 2012 2013E 2014E 2015E

Financial Summary



Valuation Metrics





Sales revenue 7,491 10,743 10,570 9,939 11,538 12,898Gross profit 1,638 2,355 1,735 1,742 2,269 2,613EBITDA 1,638 2,355 1,735 1,742 2,269 2,613Depreciation 234 263 269 358 408 458Amortisation 0 0 0 0 0 0EBIT 1,404 2,092 1,466 1,384 1,861 2,156Net interest income(expense) -58 -53 -39 -93 -100 -107Associates/affiliates 37 28 11 11 12 12Exceptionals/extraordinaries 0 0 122 0 0 0Other pre-tax income/(expense) 0 0 0 0 0 0Profit before tax 1,383 2,066 1,560 1,302 1,773 2,061Income tax expense 316 421 300 286 399 464Minorities 55 74 49 51 54 57Other post-tax income/(expense) 0 0 0 0 0 0Net profit 1,013 1,571 1,211 964 1,320 1,541

DB adjustments (including dilution) 0 -244 -125 0 0 0DB Net profit 1,013 1,327 1,086 964 1,320 1,541

Cash Flow (MYRm)

Cash flow from operations 784 939 2,024 1,561 1,303 1,669Net Capex -333 -462 -883 -1,635 -1,289 -1,250Free cash flow 451 477 1,141 -74 13 419Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -426 -639 -905 -666 -530 -726Net inc/(dec) in borrowings -63 399 389 177 191 205Other investing/financing cash flows 69 192 469 0 0 0Net cash flow 31 428 1,094 -563 -326 -102Change in working capital 242 792 -783 -89 225 192


Cash and other liquid assets 1,255 1,670 2,359 1,796 1,471 1,370Tangible fixed assets 4,596 4,723 5,041 6,248 7,059 7,781Goodwill/intangible assets 322 338 306 321 336 353Associates/investments 199 93 94 99 104 109Other assets 2,791 4,146 3,583 3,555 4,031 4,467Total assets 9,164 10,970 11,383 12,018 13,000 14,079Interest bearing debt 1,687 2,090 2,479 2,656 2,847 3,051Other liabilities 1,151 1,414 1,397 1,369 1,513 1,637Total liabilities 2,838 3,504 3,876 4,026 4,359 4,689Shareholders' equity 6,005 7,074 7,110 7,544 8,138 8,831Minorities 320 392 398 449 503 559Total shareholders' equity 6,325 7,466 7,508 7,993 8,641 9,391Net debt 432 419 120 860 1,376 1,682

Key Company Metrics

Sales growth (%) nm 43.4 -1.6 -6.0 16.1 11.8DB EPS growth (%) na 31.1 -18.2 -11.2 36.9 16.7EBITDA Margin (%) 21.9 21.9 16.4 17.5 19.7 20.3EBIT Margin (%) 18.7 19.5 13.9 13.9 16.1 16.7Payout ratio (%) 63.1 57.6 55.4 55.2 54.9 55.3ROE (%) 17.4 24.0 17.1 13.2 16.8 18.2Capex/sales (%) 4.4 4.3 8.4 16.4 11.2 9.7Capex/depreciation (x) 1.4 1.8 3.3 4.6 3.2 2.7Net debt/equity (%) 6.8 5.6 1.6 10.8 15.9 17.9Net interest cover (x) 24.1 39.3 37.8 14.9 18.7 20.2


15 November 2013

Consumer




Running the numbers

Asia

Malaysia

Agriculture

Felda Global Ventures Reuters: FGVH.KL Bloomberg: FGV MK





USDm 4,888

Company Profile

Felda Global Ventures is an agricultural and agri-commodities company with three distinct divisions: 1) palm oil, 2) sugar, 3) downstream

Price Performance

4.04.44.85.25.66.06.4

Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13

Felda Global VenturesKLSE COMPOSITE (Rebased)

Margin Trends

8121620242832

10 11 12 13E 14E 15E



0

10

20

30

40

50

0

20

40

60

80

10 11 12 13E 14E 15E


Solvency

0

20

40

60

80

-60-50-40-30-20-10

01020

10 11 12 13E 14E 15E




Financial Summary


Weighted average shares (m) 3,648 3,648 3,648 3,648 3,648 3,648Average market cap (MYRm) na na 17,826 15,687 15,687 15,687Enterprise value (MYRm) na na 20,904 18,706 15,447 15,113

Valuation Metrics

P/E (DB) (x) na na 22.1 23.9 16.2 14.8P/E (Reported) (x) na na 22.1 23.9 16.2 14.8P/BV (x) 0.00 0.00 2.76 2.41 2.24 2.08

FCF Yield (%) na na 2.5 nm 3.0 4.7Dividend Yield (%) na na 2.9 2.1 3.1 3.4

EV/Sales (x) nm nm 1.6 1.4 1.0 0.9EV/EBITDA (x) nm nm 14.5 12.4 8.0 7.3EV/EBIT (x) nm nm 15.5 13.6 8.6 7.9


Sales revenue 5,805 7,453 12,886 13,804 15,662 16,835Gross profit 1,079 2,081 1,437 1,504 1,941 2,080EBITDA 1,079 2,081 1,437 1,504 1,941 2,080Depreciation 101 103 73 104 132 150Amortisation 20 6 11 20 20 19EBIT 957 1,972 1,353 1,380 1,789 1,911Net interest income(expense) -139 -103 -22 -20 20 44Associates/affiliates 367 275 173 176 178 181Exceptionals/extraordinaries 0 0 0 0 0 0Other pre-tax income/(expense) 0 -239 -378 -505 -539 -548Profit before tax 1,184 1,905 1,126 1,030 1,448 1,587Income tax expense 255 505 221 271 369 400Minorities -3 72 99 103 110 127Other post-tax income/(expense) 0 0 0 0 0 0Net profit 932 1,328 806 656 969 1,060

DB adjustments (including dilution) 0 0 0 0 0 0DB Net profit 932 1,328 806 656 969 1,060

Cash Flow (MYRm)

Cash flow from operations -250 1,639 614 471 965 1,234Net Capex -187 -128 -170 -500 -500 -500Free cash flow -437 1,510 444 -29 465 734Equity raised/(bought back) 0 0 4,352 0 0 0Dividends paid -25 -61 -266 -511 -334 -484Net inc/(dec) in borrowings 235 0 -417 -162 -329 -329Other investing/financing cash flows -945 -404 107 -104 -57 -30Net cash flow -1,173 1,045 4,219 -806 -255 -108Change in working capital 0 0 0 0 0 0


Cash and other liquid assets 451 1,778 5,688 4,867 4,612 4,504Tangible fixed assets 1,156 3,556 3,571 4,346 4,738 5,112Goodwill/intangible assets 710 663 707 707 707 707Associates/investments 2,627 2,738 2,720 2,902 3,040 3,173Other assets 1,072 1,024 3,804 4,169 4,385 4,528Total assets 6,016 9,758 16,490 16,991 17,483 18,025Interest bearing debt 689 803 2,220 2,058 1,729 1,400Other liabilities 2,324 2,517 7,310 7,463 7,690 7,898Total liabilities 3,013 3,319 9,530 9,521 9,420 9,298Shareholders' equity 2,958 5,615 6,102 6,509 6,992 7,528Minorities 45 823 858 961 1,071 1,199Total shareholders' equity 3,003 6,439 6,960 7,470 8,064 8,727Net debt 238 -976 -3,468 -2,809 -2,883 -3,104

Key Company Metrics

Sales growth (%) nm 28.4 72.9 7.1 13.5 7.5DB EPS growth (%) na 42.5 -39.3 -18.6 47.8 9.4EBITDA Margin (%) 18.6 27.9 11.2 10.9 12.4 12.4EBIT Margin (%) 16.5 26.5 10.5 10.0 11.4 11.3Payout ratio (%) 0.0 0.0 63.4 50.9 49.9 50.5ROE (%) 39.6 31.0 13.8 10.4 14.4 14.6Capex/sales (%) 3.2 1.7 1.3 3.6 3.2 3.0Capex/depreciation (x) 1.5 1.2 2.0 4.0 3.3 3.0Net debt/equity (%) 7.9 -15.2 -49.8 -37.6 -35.8 -35.6Net interest cover (x) 6.9 19.1 62.4 68.7 nm nm


15 November 2013

Consumer




Running the numbers

Asia

Malaysia

Agriculture

Sime Darby Bhd Reuters: SIME.KL Bloomberg: SIME MK





USDm 17,769

Company Profile

Sime Darby Berhad is an investment holding company. The Group's principal activities include plantations, tyre manufacturing, property, heavy equipment and motor vehicle distribution, and general trading. Through its subsidiaries, the Company has operation in insurance broking, lease financing, and commodity trading.

Price Performance

8.48.89.29.6

10.010.410.811.2


Sime Darby Bhd KLSE COMPOSITE (Rebased)

Margin Trends

911

1214

1517

11 12 13 14E 15E 16E



12

13

14

15

16

17

-5

0

5

10

15

11 12 13 14E 15E 16E


Solvency

0

10

20

30

40

0

5

10

15

20

25

11 12 13 14E 15E 16E



Fiscal year end 30-Jun 2011 2012 2013 2014E 2015E 2016E

Financial Summary



Valuation Metrics


FCF Yield (%) 3.9 nm 4.1 4.9 5.4 5.8Dividend Yield (%) 3.4 3.8 3.5 3.9 4.2 4.5



Sales revenue 41,859 47,255 46,741 50,005 53,528 56,655Gross profit 6,549 6,968 5,931 7,391 8,003 8,534EBITDA 6,549 6,968 5,931 7,391 8,003 8,534Depreciation 1,066 1,182 1,290 1,502 1,653 1,818Amortisation 0 0 0 0 0 0EBIT 5,483 5,787 4,641 5,888 6,351 6,716Net interest income(expense) -153 -207 -320 -406 -433 -462Associates/affiliates 118 115 141 80 94 102Exceptionals/extraordinaries 0 0 0 0 0 0Other pre-tax income/(expense) 0 0 0 0 0 0Profit before tax 5,449 5,695 4,462 5,562 6,012 6,357Income tax expense 1,603 1,302 983 1,390 1,443 1,526Minorities 183 196 131 166 179 190Other post-tax income/(expense) 0 -46 352 0 0 0Net profit 3,663 4,150 3,701 4,005 4,390 4,641

DB adjustments (including dilution) 0 0 -352 0 0 0DB Net profit 3,663 4,150 3,348 4,005 4,390 4,641

Cash Flow (MYRm)

Cash flow from operations 3,703 2,656 3,701 5,044 5,568 6,071Net Capex -1,678 -2,941 -1,382 -2,276 -2,504 -2,754Free cash flow 2,025 -286 2,318 2,768 3,064 3,317Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -727 -1,998 -2,103 -2,027 -2,203 -2,414Net inc/(dec) in borrowings -391 1,894 282 1,009 1,285 1,435Other investing/financing cash flows -475 -30 -800 -900 -900 -900Net cash flow 432 -420 -303 850 1,246 1,438Change in working capital -2,103 -1,328 456 -456 -493 -437


Cash and other liquid assets 4,911 4,565 4,094 4,943 6,189 7,627Tangible fixed assets 14,947 16,421 16,595 17,494 18,533 19,657Goodwill/intangible assets 86 865 915 915 915 915Associates/investments 0 0 0 0 0 0Other assets 22,913 26,301 26,855 28,982 31,129 33,259Total assets 42,857 48,151 48,458 52,334 56,766 61,458Interest bearing debt 7,062 9,803 10,086 11,094 12,379 13,814Other liabilities 10,977 11,458 10,391 11,290 12,282 13,261Total liabilities 18,039 21,261 20,477 22,384 24,662 27,075Shareholders' equity 24,030 26,016 27,096 28,899 30,874 32,963Minorities 787 874 885 1,051 1,230 1,420Total shareholders' equity 24,818 26,890 27,981 29,950 32,104 34,382Net debt 2,151 5,239 5,992 6,151 6,190 6,187

Key Company Metrics

Sales growth (%) nm 12.9 -1.1 7.0 7.0 5.8DB EPS growth (%) na 13.3 -19.3 19.6 9.6 5.7EBITDA Margin (%) 15.6 14.7 12.7 14.8 15.0 15.1EBIT Margin (%) 13.1 12.2 9.9 11.8 11.9 11.9Payout ratio (%) 49.2 50.7 54.8 55.0 55.0 55.0ROE (%) 16.5 16.6 13.9 14.3 14.7 14.5Capex/sales (%) 4.0 6.2 3.0 4.6 4.7 4.9Capex/depreciation (x) 1.6 2.5 1.1 1.5 1.5 1.5Net debt/equity (%) 8.7 19.5 21.4 20.5 19.3 18.0Net interest cover (x) 36.0 28.0 14.5 14.5 14.7 14.5


15 November 2013

Consumer




Running the numbers

Asia

Indonesia

Agriculture




52 Week range IDR 1,000 - 2,500


USDm 1,071

Company Profile


Price Performance

800120016002000240028003200



Margin Trends

10

20

30

40

50

10 11 12 13E 14E 15E



05101520253035

-20-10

010203040

10 11 12 13E 14E 15E


Solvency

-40

-30

-20

-10

0

10 11 12 13E 14E 15E




Financial Summary



Valuation MetricsP/E (DB) (x) 12.7 9.1 15.6 20.5 10.7 10.1P/E (Reported) (x) 12.7 9.1 15.6 20.5 10.7 10.1P/BV (x) 3.85 2.63 2.50 1.93 1.69 1.53






Cash Flow (IDRbn)




Key Company Metrics




Running the numbers

Asia

Indonesia

Agriculture

Astra Agro Lestari Reuters: AALI.JK Bloomberg: AALI IJ



52 Week range IDR 13,300 - 21,750


USDm 2,928

Company Profile

Astra Agro (established in 1988) is Indonesia's largest listed palm oil plantation, with total estates in excess of 200,000 hectares. The company produces Crude Palm Oil (CPO) and also its derivative products such as palm kernel, and palm kernel oil.

Price Performance

12000

16000

20000

24000

28000

32000


Astra Agro LestariJakarta Comp. Index (Rebased)

Margin Trends

16202428323640

10 11 12 13E 14E 15E



05101520253035

-505

1015202530

10 11 12 13E 14E 15E


Solvency

0100200300400500600

-20

-10

0

10

20

30

10 11 12 13E 14E 15E




Financial Summary

DB EPS (IDR) 1,280.70 1,527.59 1,530.57 927.94 1,678.24 1,788.95Reported EPS (IDR) 1,280.70 1,527.59 1,530.57 927.94 1,678.24 1,788.95DPS (IDR) 524.00 752.00 740.00 475.55 422.43 614.18BVPS (IDR) 4,579.6 5,168.8 5,733.7 6,067.2 7,217.4 8,238.7



FCF Yield (%) 3.7 3.2 nm nm 5.4 5.4Dividend Yield (%) 2.3 3.4 3.5 2.2 2.0 2.9



Sales revenue 8,844 10,773 11,564 11,542 14,817 15,814Gross profit 3,947 4,312 4,817 4,089 6,000 6,421EBITDA 3,336 3,573 3,914 3,051 4,859 5,203Depreciation 337 377 460 750 846 948Amortisation 0 0 0 0 0 0EBIT 2,999 3,196 3,454 2,301 4,013 4,255Net interest income(expense) 31 88 -7 -53 -18 4Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries 0 0 0 0 0 0Other pre-tax income/(expense) -66 50 78 -186 0 0Profit before tax 2,964 3,333 3,525 2,062 3,995 4,259Income tax expense 860 834 1,005 515 1,199 1,278Minorities 87 93 110 85 154 164Other post-tax income/(expense) 0 0 0 0 0 0Net profit 2,017 2,406 2,410 1,461 2,643 2,817


Cash Flow (IDRbn)

Cash flow from operations 2,810 3,023 2,350 2,601 3,834 3,956Net Capex -1,477 -1,887 -2,600 -3,146 -1,992 -2,108Free cash flow 1,333 1,136 -250 -544 1,842 1,848Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -1,031 -1,480 -1,457 -936 -832 -1,209Net inc/(dec) in borrowings 0 0 961 1,443 -206 0Other investing/financing cash flows 151 -58 135 0 0 0Net cash flow 452 -403 -610 -38 805 639Change in working capital 238 197 -373 119 191 26


Cash and other liquid assets 1,241 838 228 190 995 1,633Tangible fixed assets 5,871 7,220 9,392 11,788 12,934 14,094Goodwill/intangible assets 53 56 56 50 44 38Associates/investments 0 0 0 0 0 0Other assets 1,627 2,090 2,745 2,409 2,732 2,857Total assets 8,792 10,204 12,420 14,436 16,704 18,622Interest bearing debt 0 0 972 2,415 2,209 2,209Other liabilities 1,335 1,778 2,082 2,046 2,555 2,700Total liabilities 1,335 1,778 3,054 4,461 4,763 4,909Shareholders' equity 7,212 8,140 9,029 9,554 11,366 12,974Minorities 246 287 336 421 575 739Total shareholders' equity 7,457 8,426 9,365 9,976 11,941 13,713Net debt -1,241 -838 744 2,225 1,214 576

Key Company Metrics

Sales growth (%) 19.1 21.8 7.3 -0.2 28.4 6.7DB EPS growth (%) 21.4 19.3 0.2 -39.4 80.9 6.6EBITDA Margin (%) 37.7 33.2 33.8 26.4 32.8 32.9EBIT Margin (%) 33.9 29.7 29.9 19.9 27.1 26.9Payout ratio (%) 40.9 49.2 48.3 51.2 25.2 34.3ROE (%) 30.0 31.3 28.1 15.7 25.3 23.1Capex/sales (%) 16.7 17.5 22.5 27.3 13.4 13.3Capex/depreciation (x) 4.4 5.0 5.7 4.2 2.4 2.2Net debt/equity (%) -16.6 -9.9 7.9 22.3 10.2 4.2Net interest cover (x) nm nm 481.0 43.3 224.9 nm



Running the numbers

Asia

Indonesia

Agriculture




52 Week range IDR 1,000 - 2,500


USDm 1,007

Company Profile


Price Performance

800120016002000240028003200



Margin Trends

10

20

30

40

50

10 11 12 13E 14E 15E



05101520253035

-20-10

010203040

10 11 12 13E 14E 15E


Solvency

-40

-30

-20

-10

0

10 11 12 13E 14E 15E




Financial Summary









Cash Flow (IDRbn)




Key Company Metrics




Running the numbers

Asia

Indonesia

Agriculture

Astra Agro Lestari Reuters: AALI.JK Bloomberg: AALI IJ



52 Week range IDR 13,300 - 21,750


USDm 2,880

Company Profile

Astra Agro (established in 1988) is Indonesia's largest listed palm oil plantation, with total estates in excess of 200,000 hectares. The company produces Crude Palm Oil (CPO) and also its derivative products such as palm kernel, and palm kernel oil.

Price Performance

12000

16000

20000

24000

28000

32000


Astra Agro LestariJakarta Comp. Index (Rebased)

Margin Trends

16202428323640

10 11 12 13E 14E 15E



05101520253035

-505

1015202530

10 11 12 13E 14E 15E


Solvency

0100200300400500600

-20

-10

0

10

20

30

10 11 12 13E 14E 15E




Financial Summary

DB EPS (IDR) 1,280.70 1,527.59 1,530.57 927.94 1,678.24 1,788.95Reported EPS (IDR) 1,280.70 1,527.59 1,530.57 927.94 1,678.24 1,788.95DPS (IDR) 524.00 752.00 740.00 475.55 422.43 614.18BVPS (IDR) 4,579.6 5,168.8 5,733.7 6,067.2 7,217.4 8,238.7


Valuation Metrics


FCF Yield (%) 3.7 3.2 nm nm 5.5 5.5Dividend Yield (%) 2.3 3.4 3.5 2.2 2.0 2.9



Sales revenue 8,844 10,773 11,564 11,542 14,817 15,814Gross profit 3,947 4,312 4,817 4,089 6,000 6,421EBITDA 3,336 3,573 3,914 3,051 4,859 5,203Depreciation 337 377 460 750 846 948Amortisation 0 0 0 0 0 0EBIT 2,999 3,196 3,454 2,301 4,013 4,255Net interest income(expense) 31 88 -7 -53 -18 4Associates/affiliates 0 0 0 0 0 0Exceptionals/extraordinaries 0 0 0 0 0 0Other pre-tax income/(expense) -66 50 78 -186 0 0Profit before tax 2,964 3,333 3,525 2,062 3,995 4,259Income tax expense 860 834 1,005 515 1,199 1,278Minorities 87 93 110 85 154 164Other post-tax income/(expense) 0 0 0 0 0 0Net profit 2,017 2,406 2,410 1,461 2,643 2,817


Cash Flow (IDRbn)

Cash flow from operations 2,810 3,023 2,350 2,601 3,834 3,956Net Capex -1,477 -1,887 -2,600 -3,146 -1,992 -2,108Free cash flow 1,333 1,136 -250 -544 1,842 1,848Equity raised/(bought back) 0 0 0 0 0 0Dividends paid -1,031 -1,480 -1,457 -936 -832 -1,209Net inc/(dec) in borrowings 0 0 961 1,443 -206 0Other investing/financing cash flows 151 -58 135 0 0 0Net cash flow 452 -403 -610 -38 805 639Change in working capital 238 197 -373 119 191 26


Cash and other liquid assets 1,241 838 228 190 995 1,633Tangible fixed assets 5,871 7,220 9,392 11,788 12,934 14,094Goodwill/intangible assets 53 56 56 50 44 38Associates/investments 0 0 0 0 0 0Other assets 1,627 2,090 2,745 2,409 2,732 2,857Total assets 8,792 10,204 12,420 14,436 16,704 18,622Interest bearing debt 0 0 972 2,415 2,209 2,209Other liabilities 1,335 1,778 2,082 2,046 2,555 2,700Total liabilities 1,335 1,778 3,054 4,461 4,763 4,909Shareholders' equity 7,212 8,140 9,029 9,554 11,366 12,974Minorities 246 287 336 421 575 739Total shareholders' equity 7,457 8,426 9,365 9,976 11,941 13,713Net debt -1,241 -838 744 2,225 1,214 576

Key Company Metrics

Sales growth (%) 19.1 21.8 7.3 -0.2 28.4 6.7DB EPS growth (%) 21.4 19.3 0.2 -39.4 80.9 6.6EBITDA Margin (%) 37.7 33.2 33.8 26.4 32.8 32.9EBIT Margin (%) 33.9 29.7 29.9 19.9 27.1 26.9Payout ratio (%) 40.9 49.2 48.3 51.2 25.2 34.3ROE (%) 30.0 31.3 28.1 15.7 25.3 23.1Capex/sales (%) 16.7 17.5 22.5 27.3 13.4 13.3Capex/depreciation (x) 4.4 5.0 5.7 4.2 2.4 2.2Net debt/equity (%) -16.6 -9.9 7.9 22.3 10.2 4.2Net interest cover (x) nm nm 481.0 43.3 224.9 nm


15 November 2013

Consumer



Appendix 1

Important Disclosures Additional information available upon request Disclosure checklist

Company Ticker Recent price* Disclosure

London Sumatra LSIP.JK 1,820.00 (IDR) 14 Nov 13 NA

Astra Agro Lestari AALI.JK 21,550.00 (IDR) 14 Nov 13 NA *Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Michelle Foong Historical recommendations and target price: London Sumatra (LSIP.JK) (as of 11/14/2013)

12

3

45

6

7

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 May 13 Aug 13

Sec

uri

ty P

rice

Date

Previous Recommendations

Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating

Current Recommendations

Buy Hold Sell Not Rated Suspended Rating

*New Recommendation Structure as of September 9,2002

1. 02/03/2012: Buy, Target Price Change IDR3,000.00 5. 01/11/2012: Buy, Target Price Change IDR2,800.00

2. 26/06/2012: Buy, Target Price Change IDR2,900.00 6. 06/03/2013: Downgrade to Hold, Target Price Change IDR1,900.00

3. 15/07/2012: Buy, Target Price Change IDR3,500.00 7. 27/09/2013: Hold, Target Price Change IDR1,350.00

4. 21/09/2012: Buy, Target Price Change IDR3,200.00

15 November 2013

Consumer



Historical recommendations and target price: Astra Agro Lestari (AALI.JK) (as of 11/14/2013)

12

34

5

6

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 May 13 Aug 13

Sec

urit

y P

rice

Date

Previous Recommendations

Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating

Current Recommendations

Buy Hold Sell Not Rated Suspended Rating

*New Recommendation Structure as of September 9,2002

1. 02/03/2012: Buy, Target Price Change IDR25,000.00 4. 01/11/2012: Buy, Target Price Change IDR23,000.00

2. 14/06/2012: Buy, Target Price Change IDR23,500.00 5. 06/03/2013: Downgrade to Hold, Target Price Change IDR18,500.00

3. 11/07/2012: Buy, Target Price Change IDR25,000.00 6. 26/07/2013: Hold, Target Price Change IDR17,200.00 Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes:

1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

55 %

36 %

9 %26 %

22 %13 %

050

100150200250300350400450

Buy Hold Sell

Asia-Pacific Universe

Companies Covered Cos. w/ Banking Relationship

15 November 2013

Consumer



Regulatory Disclosures

1. Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

2. Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

3. Country-Specific Disclosures

Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where at least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483. EU countries: Disclosures relating to our obligations under MiFiD can be found at http://www.globalmarkets.db.com/riskdisclosures. Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc.Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, Japan Investment Advisers Association. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless “Japan” or "Nippon" is specifically designated in the name of the entity. Reports on Japanese listed companies not written by analysts of Deutsche Securities Inc. (DSI) are written by Deutsche Bank Group’s analysts with the coverage companies specified by DSI. Malaysia: Deutsche Bank AG and/or its affiliate(s) may maintain positions in the securities referred to herein and may from time to time offer those securities for purchase or may have an interest to purchase such securities. Deutsche Bank may engage in transactions in a manner inconsistent with the views discussed herein. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation.

GRCM2013PROD030737

David Folkerts-Landau

Group Chief Economist Member of the Group Executive Committee

Guy Ashton

Global Chief Operating Officer Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Richard Smith and Steve Pollard Co-Global Heads Equity Research

Michael Spencer Regional Head

Asia Pacific Research

Ralf Hoffmann Regional Head

Deutsche Bank Research, Germany

Andreas Neubauer Regional Head

Equity Research, Germany

Steve Pollard Regional Head

Americas Research

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